Exhibit 10.27

 

LICENSE,  DEVELOPMENT AND SUPPLY AGREEMENT

 

This LICENSE DEVELOPMENT AND SUPPLY AGREEMENT (“Agreement”) is made as of the
31st day of December, 2003 (the “Effective Date”) and is by and between
BioMeriéux, Inc., a Missouri corporation, (“BioMeriéux, Inc.”), and Cepheid, a
California corporation, (“Cepheid”).  Cepheid and BioMeriéux are sometimes
referred to herein individually as a “Party,” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, BioMeriéux has significant experience in the development, manufacture,
commercialization and marketing of medical and industrial diagnostic products
and technology, including proprietary NASBA (as defined below) technology for
the amplification of nucleic acids;

 

WHEREAS, Cepheid has developed proprietary technology and products, and
manufactures and markets analytical systems, including instruments, cartridges
and other proprietary products designed for nucleic acid based analysis, that
have applications for, among other things, research and clinical diagnostic and
industrial use;

 

WHEREAS, BioMeriéux desires for Cepheid to manufacture and supply to BioMeriéux
Cepheid’s systems and Cepheid’s proprietary technology, and to work with
BioMeriéux in a program to develop modified instruments and products, so that
BioMeriéux may use and distribute such products and technology in connection
with its commercialization of NASBA technology for clinical research and
diagnostics and industrial use;

 

WHEREAS, the Parties desire to provide each other with certain other rights and
options to tests to be utilized with Cepheid Instruments (as defined below) and
modified instruments..

 

NOW THEREFORE, the Parties, in consideration of the mutual obligations
hereinafter set forth and intending to be legally bound, hereby agree as
follows:

 

1.             DEFINITIONS.

 

1.1          “Administrative Expenses” shall mean the proportionate allocation
of costs associated with administrative, finance, accounting, and human resource
costs.

 

1.2          “Affiliate” of a Party or other person or entity means any
corporation, firm, partnership or other entity, whether de jure or de facto,
which directly or indirectly owns or controls, is owned or controlled by or is
under common ownership or control with such Party or other person or entity to
the extent of more than 50% of the equity having the power to vote on or direct
the affairs of the entity, or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular jurisdiction.

 

1.3          “Background BioMeriéux Intellectual Property” means all
Intellectual Property Rights that are owned by, either partially or wholly,
BioMeriéux, or are licensed to, or otherwise controlled by, BioMeriéux,
excluding only Collaboration BioMeriéux Intellectual Property, and Collaboration
Joint Intellectual Property.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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1.4          “Background Cepheid Intellectual Property” means all Intellectual
Property Rights that are owned by, either partially or wholly, Cepheid, or are
licensed to, or otherwise controlled by, Cepheid, excluding only Collaboration
Cepheid Intellectual Property and Collaboration Joint Intellectual Property.

 

1.5          “Bankruptcy Event” means with regard to a Party, any of the
following events:  (i) such Party files a voluntary petition for relief under
Title 11 of the United States Code (the “Bankruptcy Code”); or (ii) there is
filed against such Party an involuntary or ancillary petition for relief under
the Bankruptcy Code, and either (x) such petition is not dismissed within ninety
(90) days after its filing or (y) an order for relief is entered against such
Party in such petition; (iii) an action or proceeding is filed with regard to
such Party in any court or with any agency in each case having jurisdiction
thereof under any statute or regulation (other than the Bankruptcy Code) of any
state or country, which is a petition in bankruptcy or insolvency or for the
general reorganization of the Party’s financial affairs; or for the appointment
of a receiver or trustee over such Party or of its assets, and, in the case of a
filing against such Party, the action or proceeding is not stayed or dismissed
within ninety (90) days after the filing thereof, or (v) such Party files for
dissolution or adopts a plan of liquidation, or (vi) such Party makes a general
assignment for the benefit of creditors.

 

1.6          “BioMeriéux Materials” means BioMeriéux’s proprietary technology
and materials relating to nucleic acid based assays including proprietary
reagents, reagent components, and mixtures used in or useful for the NASBA
method, real-time detection with molecular beacons, internal calibrators,
controls, methods to prevent cross-contamination, pellets and the use of
reagents therewith, buffers and wash solutions and other technology related to
the NASBA Field of Use and/or the EASY-Q® platform.

 

1.7          “Cartridge” means a closed or substantially closed device, which
may include a cartridge or reaction tube for performing Tests that contains,
among other things, pelletized,  dried or other type of reagents intended for
single or multiple use sample preparation and nucleic acid analysis (including
use in either the NASBA or Non-NASBA Fields of Use) and that is intended and
suitable for insertion into, or use as a part of, or is a part or component of,
or an attachment to, an instrument designed to hold such device and/or
facilitate or enable its use, which instrument Cepheid manufactures or has
manufactured, including Cepheid’s currently existing Instruments, or that can be
used alone or with other instruments or devices, including the HTS, for such
purpose.  For purposes of clarification, other ancillary disposables purchased
by BioMeriéux from Cepheid for use with the Cartridges in performing a Test, but
not contained in the Cartridge, such as buffer solutions, reagents, cuvettes,
wash solutions, and so on (“Ancillary Disposables”), shall not be deemed to be
included in the definition of Cartridge.

 

1.8          “Change of Control” means (i) the sale, transfer or other
disposition of all or substantially all those assets of Cepheid required for
Cepheid to substantially perform its obligations under this Agreement; (ii) the
acquisition of Cepheid by merger, consolidation, reorganization or other
transaction or series of related transactions resulting in the exchange of
outstanding shares of Cepheid’s securities, or the issuance of new Cepheid
securities to a Third Party,  such that the shareholders of Cepheid prior to
such transaction or series of transactions own, directly or indirectly,
immediately after such transaction or transactions, less than 50% of the voting
power of the surviving or resulting entity or any direct or indirect parent
thereof; or (iii) the consummation of the acquisition of 50% or more of the then
outstanding capital stock of Cepheid by a Third Party.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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1.9          “Collaboration BioMeriéux Intellectual Property” means all
Intellectual Property Rights arising out of work performed under this Agreement
or in furtherance of this Agreement during the term of this Agreement that are
invented (as determined by applicable US law with respect to patentable
inventions), or otherwise conceived solely by one or more employees or agents of
BioMeriéux or its Affiliates, or solely by one or more employees or agents of
BioMeriéux or its Affiliates and one or more employees or agents of a Third
Party.

 

1.10        “Collaboration Cepheid Intellectual Property” means all Intellectual
Property Rights arising out of work performed under or in furtherance of this
Agreement during the term of this Agreement that are invented (as determined by
applicable US law with respect to patentable inventions), or otherwise conceived
solely by one or more employees or agents of Cepheid or its Affiliates, or
solely by one or more employees or agents of Cepheid or its Affiliates and one
or more employees or agents of a Third Party.

 

1.11        “Collaboration Joint Intellectual Property” means all Intellectual
Property Rights arising out of work performed by Cepheid under this Agreement or
in furtherance of this Agreement, or out of work performed by BioMeriéux under
this Agreement, that are jointly invented (as determined by applicable US law
with respect to patentable inventions), or otherwise conceived by one or more
employees or agents of Cepheid or its Affiliates and by one or more employees or
agents of BioMeriéux or its Affiliates.

 

1.12        “Confidential Information” means confidential knowledge, Know-how,
practices, processes, products, materials, equipment or other technical or
business information that has been identified in writing as Confidential
Information at the time of disclosure, or if disclosed orally or visually is
confirmed in writing to be Confidential Information within 30 days of such
disclosure. Notwithstanding the above, Confidential Information will not
include, and nothing in Section 12 will in any way restrict the rights of either
Party to use, disclose or otherwise deal with, any information which:

 

(i)            can be demonstrated to have been in the public domain as of the
date of this Agreement or thereafter comes into the public domain through no act
of the receiving Party; or

 

(ii)           can be demonstrated by written records existing prior to receipt
of such information to have been independently known to the receiving Party
prior to the receipt thereof;

 

(iii)          can be demonstrated to have been rightfully received by the
receiving Party from a Third Party who did not require the receiving Party to
hold it in confidence or limit its use, and who did not acquire it, directly or
indirectly, from the other Party to this Agreement under a continuing obligation
of confidentiality; or

 

(iv)          can be demonstrated to have been independently conceived, invented
or acquired by employees or agents of the receiving Party who have not been
personally exposed to relevant Confidential Information of the other Party.

 

1.13        “Cepheid Patents” means Patent Rights arising from Cepheid
Background Intellectual Property, Collaboration Cepheid Intellectual Property,
Cepheid Joint Intellectual Property and [***] Patents.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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1.14        “Cepheid Technology” means Instruments, Cartridges (other than
BioMeriéux Materials supplied by BioMeriéux incorporated into such Cartridge),
reaction tubes, and other proprietary technology designed for nucleic acid based
analysis.

 

1.15        “Development Costs” means the fully-burdened development costs of a
Product as determined using Cepheid’s customary practices and procedures and, to
the extent applicable, in accordance with GAAP, including the following: direct
costs such as personnel, supplies, materials, contracted and outside services
and support costs; allocated indirect labor expenses, including expenses for
quality assurance and warehouse personnel, and facility-related expenses,
including expenses for rent, utilities, depreciation, and insurance; and other
expenses customarily charged to research and development in accordance with
GAAP.

 

1.16        “FDA” means the United States Food and Drug Administration and any
successor agency thereto

 

1.17        “GAAP” means Generally Accepted Accounting Principles in the United
States.

 

1.18        “[***]” or “[***]” means a system, as described in Section 4.1.2,
with significantly higher throughput than present Cepheid systems, to be
developed by BioMeriéux and Cepheid, under the Joint Development Program

 

1.19        “Instruments” mean Cepheid’s instruments, including Software,
capable of carrying out a nucleic acid based analysis in the NASBA or Non-NASBA
Fields of Use, in or with the use of a Cartridge or reaction tube, including
Cepheid’s GeneXpert and SmartCycler products, and the HTS, or any modified or
improved version thereof

 

1.20        “Intellectual Property Rights” means all intellectual property
rights worldwide arising under statutory or common law, whether or not
perfected, including all (i) Patent Rights; (ii) rights associated with works of
authorship including copyrights, copyright applications, copyright
registrations, mask works, mask work applications and mask work registrations;
(iii) rights relating to the protection of trade secrets and confidential
information; (iv) any right analogous to those specifically set forth in this
definition and any other proprietary rights relating to intellectual property
(other than trademark, trade dress, or service mark rights);; and (v) Know-how.

 

1.21        “Joint Development Program” means the joint development program
undertaken by the Parties, pursuant to Section 4 of this Agreement.

 

1.22        “Know-how” means confidential and/or proprietary technical
information, techniques, processes, methods, data, assays, substances and
materials, and other information in a Party’s possession that is not generally
available to the public, excluding in each case any such information,
techniques, processes, methods, data, assays, substances and materials to the
extent disclosed in or claimed by a Patent.

 

1.23        “Licensed Trademarks” mean all trademarks, packaging designs and
other trade dress used by or on behalf of Cepheid and its Affiliates prior to
the Effective Date in connection with Products and all other trademarks relating
thereto and any registrations thereof or any pending applications relating
thereto, including those trademarks set forth on Schedule 1.23.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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1.24        “Manufacturing Cost” means the fully-burdened manufacturing cost of
a product as determined using Cepheid’s customary practices and procedures and,
to the extent applicable, in accordance with GAAP as consistently applied,
including the following: direct material cost, material overhead cost, direct
labor cost, fixed manufacturing overhead cost, variable manufacturing overhead
cost, cost of quality control and product testing, manufacturing variance cost
and other costs that may be properly attributed to inventory as manufacturing
costs pursuant to GAAP, (but not including royalties, fees or similar
consideration paid to Third Parties for rights to Intellectual Property Rights,
including up-front payments for such rights, unless otherwise specifically
agreed in writing by the Parties).  The Manufacturing Cost with respect for any
given calendar year shall be determined in accordance with Section 8.3. 

 

1.25        “Manufacturing Transfer Costs” mean Cepheid’s normal costs and
expenses that are directly related to and arise directly from Cepheid’s
assistance to BioMeriéux in establishing, equipping, integrating and testing a
manufacturing line for Cartridges or Instruments as may be applicable, as
follows:  (i) reproduction and transfer of technology, documents, plans,
schematics, drawings, and other materials (to be only in Cepheid’s own format,
unless conversion to a different format as requested by BioMeriéux would not
unreasonably interfere with Cepheid’s operations and BioMeriéux agrees in
writing to pay for the full cost of such conversion), (ii) technical or other
necessary assistance by Cepheid personnel in production line design and set up,
and during the initial production stages occurring within six months after
completion of the manufacturing technology transfer, (iii) any travel costs or
expenses (to the extent incurred at BioMeriéux’s request) of Cepheid personnel
in connection with the foregoing, and (iv) wages, salaries and all associated
benefits (such benefits not to exceed 25% of the cost of such wages and
benefits) of Cepheid personnel to the extent otherwise allocable to Cepheid’s
assistance to BioMeriéux in establishing, equipping, integrating and testing a
manufacturing line for Cartridges or Instruments as may be applicable; but
excluding in the case of clauses (i), (ii) and (iii) any Administrative Expenses
and other indirect costs (e.g. facilities-related costs). 

 

1.26        “Material Adverse Effect” means an event or occurrence likely to
have a material adverse effect on the business, results of operations or
financial condition of a Party taken as a whole.

 

1.27        “NASBA” means BioMeriéux’s proprietary isothermal,
transcription-based nucleic acid amplification process, , involving the use of
reverse transcriptase (“RT”), RNase H and RNA polymerase, substantially as
described in U.S. Patent Nos. [***].

 

1.28        “NASBA Field of Use” means the preparation, purification, detection,
quantification, amplification or analysis of nucleic acids in connection with
the use of NASBA or TMA (trans-mediated amplification method).

 

1.29        “Net Sales” means the amount received from sales or lease of a
Product to Third Parties, whether said sales or lease to said Third Parties were
made by a Party or any Affiliate, and, unless sold for resale, sales of a
Product to a Party’s Affiliates (other than for use in a development program or
solely for training and demonstration purposes), less, in each case, to the
extent actually paid and not already taken and reflected in the amount received,
freight, insurance and other transportation costs, tariffs, duties, sales tax,
and similar governmental charges (except income taxes), normal and customary
trade, quantity and cash discounts, and credits and rebates allowed and taken.
Notwithstanding the foregoing, in the event that more than ten percent ([***]%)
of BioMeriéux’s total receipts from Third Parties in either the United States,
Japan or the EU during a calendar year are derived from BioMeriéux sales or
leases to

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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distributors in the United States, Japan and/or the EU, as applicable, then the
Parties shall agree upon a formula under which the Net Sales for such year, with
respect to receipts from such distributors, shall be increased by an amount to
approximate the amount that would have been received by BioMeriéux, with respect
to the applicable territory, if it had made such sales directly to the end
user.  In the event the Net Sales of Product includes or is lumped together with
a charge(s) for the lease, sale or other use of an Instrument, then the Net
Sales for such Licensed Product shall be reduced by an amount of thirteen and
one-half percent (13.5%) as a reasonable allowance for such Instrument related
charge provided such charge is reflected in a written contract with the
customer.

 

1.30        “Non-NASBA Field of Use” means the use of any method or process
other than NASBA or TMA for nucleic acid amplification.

 

1.31        “Patents” mean (i) all patents and patent applications, (ii) any
substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection certificates and the like, and any provisional
applications, of any such patents or patent application, and (iii) any foreign
or international equivalent of any of the foregoing.

 

1.32        “Patent Rights” means the Valid Claims of all U.S. Patents assigned
to BioMeriéux or Cepheid as the context dictates.

 

1.33        “Products” means Instruments and Cartridges (including Cepheid
Instruments that have not been modified for use in the NASBA Field of Use, and
pre-[***] Instruments), spare parts for such Instruments (“Spare Parts”) and
Ancillary Disposables sold or transferred by a Party to the other Party under
this Agreement. 

 

1.34        “Software” means the Cepheid software and firmware that is used to
operate an Instrument to perform nucleic acid based analysis, and any necessary
interfaces with the hardware and software of the end-user.

 

1.35        “Test” means the assay and protocol associated therewith, which is
used with an Instrument to perform nucleic acid based analysis of a single
condition to be detected or measured with one or more nucleic acid sequences.

 

1.36        “Third Party” means a person or entity that is not a Party or an
Affiliate of a Party.

 

1.37        “Valid Claim” means, with respect to a particular country, a claim
of an issued and unexpired Patent in such country that (i) has not been revoked
or held unenforceable or invalid by a decision of a court or governmental agency
of competent jurisdiction from which no appeal can be taken or has been taken
within the time allowed for appeal; (ii) has not been abandoned, disclaimed,
denied or admitted to be invalid or unenforceable through reissue or disclaimer
or otherwise in such country; and (iii) provides exclusive and enforceable
rights with respect to the sale of a Product, as the case may be, in such
country.

 

1.38        “Work Plan” means a plan of the actions to be taken to accomplish
the goals of the Joint Development Program.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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1.39        “[***]” means those Patent Rights owned by the [***] and licensed to
Cepheid pursuant to that License Agreement between the [***] and Cepheid,
effective March 12, 1997, (the [***] License),  copy of which is attached as
Appendix I, a license to which is required in order to make, use, offer for sale
and sell Instruments.

 

2.             TEST OPTIONS.

 

2.1          BioMeriéux Non-NASBA Test Option.  BioMeriéux may wish to develop
one or more Tests for use outside the NASBA Field of Use that use Cepheid
Technology (“BioMeriéux Non-NASBA Tests”), and Cepheid may, in its sole
discretion, agree to BioMeriéux’s development of up to ten BioMeriéux Non-NASBA
Tests during the eight year period following the Effective Date.  If BioMeriéux
desires to develop a BioMeriéux Non-NASBA Test, it will provide Cepheid with
written notice describing the proposed BioMeriéux Non-NASBA Test.  Within sixty
days of receipt of such notice from BioMeriéux, Cepheid will provide BioMeriéux
with a written response setting forth whether Cepheid will agree to allow
BioMeriéux to undertake development of such Test and the economic and other
terms under which Cepheid would license BioMeriéux to develop such Test;
provided, however, the terms related to payment of royalties by BioMeriéux shall
provide for BioMeriéux to pay Cepheid (i) a royalty of [***]% on Net Sales of
such Tests, or the practice of such Tests on an Instrument, as applicable, and
(ii) any Third Party royalties to be paid by Cepheid (including license fees, or
access fees) that Cepheid would not be required to pay in absence of
BioMeriéux’s exploitation of such Non-NASBA Test (i.e., only if an access or
license fee is paid solely with respect to BioMeriéux’s Non-NASBA Tests, and
Cepheid is not already licensed by the Third Party to sell a similar Test ). 
Unless Cepheid and BioMeriéux subsequently agree on all other terms relevant to
such BioMeriéux Non-NASBA Test, BioMeriéux shall have no rights to such Test,
and no option shall be deemed to have been exercised in such case. Failure to
respond by Cepheid shall not be construed as providing any rights in such Test.

 

2.2          Cepheid NASBA Test Option.   Cepheid may wish to develop one or
more NASBA based Tests that use BioMeriéux Materials (“Cepheid NASBA Tests”),
and BioMeriéux may, in its sole discretion, agree to Cepheid’s development of up
to ten Cepheid NASBA Tests during the eight year period following the Effective
Date.  If Cepheid desires to develop a Cepheid NASBA Test, it will provide
BioMeriéux with written notice describing the proposed Cepheid NASBA Test. 
Within sixty days of receipt of such notice from Cepheid, BioMeriéux will
provide Cepheid with a written response setting forth whether BioMeriéux will
agree to allow Cepheid to undertake development of such Test and the economic
and other terms under which BioMeriéux would license Cepheid to develop such
Test,  which terms shall provide for Cepheid to pay a royalty of [***] percent
([***]%) on Net Sales of such Tests, or practice of such Tests on an Instrument,
as applicable.  In addition, Cepheid shall agree to assume and be responsible
for any Third Party royalties that become due with respect to the Cepheid NASBA
Tests.  Any additional BioMeriéux Patent Rights, outside the NASBA Field of Use
shall not be subject to the [***]% royalty cap set forth in the preceding
sentence. Unless Cepheid and BioMeriéux subsequently agree on all terms relevant
to such Cepheid NASBA Test, Cepheid shall have no rights to such Test, and no
option shall be deemed to have been exercised in such case. Failure to respond
by BioMeriéux shall not be construed as providing any rights in such Test. 

 

2.3          NASBA Improvements. Improvements specific to the development of
Products for use solely in the NASBA Field of Use shall be at the sole expense
of BioMeriéux as set forth in the applicable Work Plan, except, if such
improvements are of benefit to Cepheid in

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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connection with its exercise of a Cepheid NASBA Test option pursuant to Section
2.2, then the Parties will share the costs related to such improvement equally.
Any costs incurred by BioMeriéux with respect to such improvement prior to the
Effective Date will not be subject to the cost sharing described in the
preceding sentence.

 

2.4          Effect of Test Option Refusal.  In no event will Cepheid’s refusal
to allow BioMeriéux to develop a BioMeriéux Non-NASBA Test in accordance with
Section 2.1 in any way prevent or limit Cepheid’s ability to develop that same
Test by itself or with a Third Party, nor will BioMeriéux’s refusal to allow
Cepheid to develop a Cepheid NASBA Test in accordance with Section 2.2, in any
way prevent or limit BioMeriéux’s ability to develop that same Test by itself or
with a Third Party.  

 

3.             LICENSE GRANTS.

 

3.1          Instrument Distribution.  Subject to the terms and conditions of
this Agreement, Cepheid appoints BioMeriéux as its [***] distributor of
Instruments (including the HTS) solely in the NASBA Field of Use.  BioMeriéux
may appoint sub-distributors to distribute the Instruments on its behalf.

 

3.2          Cartridge Distribution.  Subject to the terms and conditions of
this Agreement , Cepheid appoints BioMeriéux as its [***] distributor of
Cartridges solely in the NASBA Field of Use.  BioMeriéux may appoint
sub-distributors to distribute the Cartridges on its behalf.

 

3.3          Instrument Production.  Subject to the other terms and conditions
of this Agreement, including Section 9.2 and BioMeriéux’s payment to Cepheid of
the Instrument Option Payment provided for therein, Cepheid grants BioMeriéux a
[***] right and license, under Collaboration Cepheid Intellectual Property and
Background Cepheid Intellectual Property, to make, and have made, import, offer
to sell, sell, and use Instruments (including the HTS) solely in the NASBA Field
of Use. In consideration for the royalties to be paid pursuant to Section 6.2.2
hereof by BioMeriéux under the [***]  Patent Rights, and subject to the prior
rights of the [***]  and the United States Government, Cepheid hereby grants a
sublicense under the [***]  License, to the [***]  Patent Rights to make, and
have made, import, offer to sell, sell, and use Instruments ( including the HTS)
solely in the NASBA Field of Use.  BioMeriéux covenants and agrees that it will
forebear from exercising any of the rights granted under this Section 3.3 unless
and until the conditions described in Section 9.2 have been met. 

 

3.4          Cartridge Production.  Subject to the other terms and conditions of
this Agreement, including Section 9.1 and BioMeriéux’s payment to Cepheid of the
Cartridge Option Payment, Cepheid grants BioMeriéux a [***] right and license,
under Collaboration Cepheid Intellectual Property and Background Cepheid
Intellectual Property, to make, and have made, import, offer to sell, sell, and
use Cartridges solely in the NASBA Field of Use.  BioMeriéux covenants and
agrees that it will forebear from exercising any of the rights granted under
this Section 3.4 unless and until the conditions described in Section 9.1 have
been met.

 

3.5          Development License.  Subject to the terms and conditions of this
Agreement, BioMeriéux grants Cepheid a [***] right and license to: (i) practice
NASBA methods for research use only; and (ii) practice the Background BioMeriéux
Intellectual Property and Collaboration BioMeriéux Intellectual Property, to
develop Instruments, Cartridges, Software, Tests, and the High Throughput System
in accordance with the Work Plan.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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3.6          Manufacturing License.  Subject to the terms and conditions of this
Agreement, BioMeriéux grants Cepheid a [***] right and license to manufacture
for BioMeriéux Instruments, [***] and Cartridges under all BioMeriéux
Intellectual Property Rights.

 

3.7          Collaboration BioMeriéux Intellectual Property.  Subject to the
terms and conditions of this Agreement, BioMeriéux grants Cepheid an option to
acquire a [***] right and license to the Collaboration BioMeriéux Intellectual
Property to make, have made, import, offer to sell, sell, and use Instruments,
Cartridges, Software, Tests and the High Throughput System solely in the
Non-NASBA Field of Use upon terms and conditions to be agreed upon.

 

3.8          Collaboration Cepheid and Collaboration Joint Intellectual
Property.  Subject to the terms and conditions of this Agreement, Cepheid grants
BioMeriéux an exclusive, fully paid-up, worldwide right and license, to make,
have made, import, offer to sell, sell, and use the Collaboration Cepheid and
Collaboration Joint Intellectual Property solely in the NASBA Field of Use. 
Subject to the terms and conditions of this Agreement, BioMeriéux grants Cepheid
an exclusive, fully paid-up, worldwide right and license to make, have made,
import, offer to sell, sell, and use the Collaboration Cepheid and Collaboration
Joint Intellectual Property solely in the Non-NASBA Field of Use.

 

3.9          Sublicensing Rights. 

 

3.9.1       BioMeriéux Sublicense Rights.  Subject to the terms and conditions
of this Agreement, BioMeriéux has the unrestricted right, without any duty of
accounting or sharing of royalties, to sublicense solely in the NASBA Field of
Use, Collaboration Cepheid Patent Rights and Collaboration Joint Patent Rights,
subject to existing Background Cepheid Patent Rights. 

 

3.9.2       Cepheid Sublicense Rights. Subject to the terms and conditions of
this Agreement, Cepheid has the unrestricted right, without any duty of
accounting or sharing of royalties, to sublicense solely in the Non-NASBA Field
of Use, Collaboration Cepheid Patent Rights and Collaboration Joint Patent
Rights, subject to existing Background BioMeriéux Patent Rights.

 

3.10        Reservation of Rights.  Except for the licenses expressly granted in
this Agreement, no other rights or licenses are granted under either Party’s
Intellectual Property Rights whether by implication, estoppel or otherwise.
Subject to Section 10.1.3. and 10.1.6, Cepheid will not, without BioMeriéux’s
written consent, develop or supply to or on behalf of a Third Party, a non-NASBA
instrument which uses any Background BioMeriéux Intellectual Property.   Unless
otherwise stated herein, no purported grant of a sublicense under the terms of
this Agreement shall be effective to grant a sublicense under or to the
Intellectual Property Rights of a Third Party unless and except to the extent
the granting Party has the express right to grant such sublicense.

 

4.             COLLABORATION.

 

4.1          Joint Development Programs.

 

4.1.1       Initial Development Program.  The purpose of the Joint Development
Program initially shall be to research, develop and implement such changes,
modifications or enhancements to one or more Products (or parts thereof) as the
Parties may

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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agree and as are reasonably necessary or appropriate to ensure that such
Products interoperate effectively and efficiently with NASBA. Unless otherwise
agreed, the Products will be configured solely for use within the NASBA Field of
Use.

 

4.1.2       [***] Development Program.  Upon BioMeriéux’s written request and
based on market requirements, the Parties shall undertake to develop a [***]
System. “[***] or [***]” means a [***], which shall be jointly developed by
BioMeriéux and Cepheid under a Work Plan to be agreed upon by the Parties. 
Conceptually, the High Throughput System will have a target capacity of at least
[***] Tests per hour (based on a 30 minute protocol per test),  but the final
design,  final capacity (measured in Tests/hour using a [***] minute protocol
per Test) and other specifications will be mutually agreed upon by the Parties. 
The Manufacturing Fee for the [***] will be dependent upon the throughput
capacity, as specified in Section 8.4.2.  For purposes of clarification, and
subject to refinement by the Parties, it is anticipated that the [***] may
contain, among other things, such features as a storage region for empty
cartridges, a sample storage and loading region, a robotic handling assembly,
and a number of cartridge processing bays, and that each cartridge processing
bay will consist of either a fluidic module or an I-CORE module or both.   The
design approach for the [***] is intended to take maximum advantage of the
modular and random access attributes and other technology of the GeneXpert
instrument, while also seeking, to the extent possible, to maximize the
efficiency and minimize the cost of the Instruments, Cartridges and Tests.

 

4.1.3       Other Possible Development Programs.  In the event that the Parties
desire to collaborate on the conduct of development activities in addition to
those contemplated by Sections 4.1.1 or 4.1.2, the Parties shall conduct such
activities pursuant to a Work Plan or such additional agreement as they
determine appropriate.

 

4.1.4       Work Plan, Budget, Responsibility for Costs.  Immediately after the
Effective Date with respect to Section 4.1.1, following BioMeriéux’s notice
under Section 4.1.2 and following the Parties agreeing pursuant to Section 4.1.3
to pursue a Joint Development Program, the Parties shall work together and use
diligent and continuing efforts to establish at the earliest feasible time a
separate Work Plan for each Joint Development Program.  For those joint
development activities undertaken pursuant to Sections 4.1.1 and 4.1.2, each
Work Plan shall include an annual budget. BioMeriéux will pay Cepheid for all
Development Costs incurred by Cepheid in connection with the development plus
[***] percent ([***]%).  Responsibility for costs and expenses for regulatory
compliance or approval for the Tests, Cartridges and/or Instruments developed,
including the HTS, will be determined under Section 5.3.3.  BioMeriéux will also
bear all its own costs and expenses incurred in furtherance of the Joint
Development Program, including any costs or expenses that Cepheid may incur in
developing any Tests that the Parties may mutually agree to develop under the
Joint Development Program.

 

4.1.5       Payment of Budgeted Development Costs.  On or prior to the first
business day of each calendar month during the term of the Joint Development
Program, BioMeriéux shall pay to Cepheid the budgeted amount of Development
Costs for such month.  Cepheid agrees to use such payments solely to conduct the
development activities called for in the applicable Work Plan. Cepheid shall
promptly advise BioMeriéux in writing if the Development Costs for any
applicable calendar quarter have exceeded, or are expected to exceed the
budgeted amount for such quarter by more than 10%. In such event, Cepheid shall
take

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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prompt and reasonable steps to curtail any further overrun (or prevent an
overrun, as applicable), including the reduction of efforts to a minimum level
pending the discussions of the Joint Steering Committee as described below. The
Joint Steering Committee shall meet as soon as reasonably possible to discuss
available measures in response to the overrun (or expected overrun).  The Joint
Steering Committee shall determine, among other things, the cause of the
overrun.  In connection with such discussions, Cepheid shall provide BioMeriéux
with a detailed report of the development activities performed and an accounting
of the costs of such activities.  BioMeriéux will advise Cepheid in writing of
what adjustments in the Work Plan or budget it wishes to make, including whether
BioMeriéux is willing to continue funding the applicable Work Plan.

 

4.1.6       Report of Developments Costs Incurred.  At least 30 days prior to
the beginning of each calendar quarter during the term of any Work Plan, Cepheid
shall submit to BioMeriéux a report containing (a) a statement of any funds
received from BioMeriéux in a preceding calendar quarter (i.e., the calendar
quarter immediately preceding the quarter in which such report is to be
submitted) which exceeded the amount of Development Costs incurred in such
calendar quarter for that Work Plan, and (b) a reasonably detailed statement of
the reimbursable or creditable Development Costs for that Work Plan actually
incurred by Cepheid during the preceding calendar quarter, with copies of
relevant invoices and receipts for any Third Party charges included in the
Development Costs for such calendar quarter. In the event of an excess under
subclause (a) above, it shall be applied as a credit against and shall reduce
BioMeriéux’s payment due for such Work Plan in the following calendar quarter.

 

4.1.7       Diligence.  Under the direction and supervision of the Joint
Steering Committee (as defined in Section 4.2), each of Cepheid and BioMeriéux
shall perform, or cause to be performed, its respective development activities
in accordance with this Agreement, the Work Plan and the development budget. 
Each Party shall conduct its respective development activities in good
scientific manner, in compliance in all material respects with all applicable
law and good clinical and laboratory practices.  

 

4.1.8       Information Exchange. The Parties will use reasonable efforts to
keep each other informed with respect to all activities directly related to the
Joint Development Program, including access to design plans and drawings,
specifications, engineering change orders, software, supplier information,
nucleic acid sequences, processes, materials, validation information, and
chemistries directly related to each project performed by the Parties.  Both
Parties will participate in milestone reviews for each project in accordance
with a schedule to be agreed upon by them in the Work Plan. Cepheid and
BioMeriéux each shall maintain, or cause to be maintained, records of its
respective development activities in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes, which shall be complete
and accurate and shall fully and properly reflect all work done and results
achieved in the performance of its respective development activities, and which
shall be retained by such Party for at least five (5) years after the
termination of this Agreement, or for such longer period as may be required by
applicable law.  The Parties shall make such records available to each other
subject to the confidentiality obligations of Section 12.

 

4.1.9       Books and Accounts.  Cepheid shall maintain complete and accurate
books, records and accounts in connection with its responsibilities under this
Section 4, that, in reasonable detail (and in conformity with GAAP with respect
to financial matters), fairly reflectthe performance of its activities with
respect to the Joint Development Program, including without limitation, any
reimbursable Development Costs incurred by it or its Affiliates.  Such

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

11

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books, records and accounts shall be retained, and shall be subject to audit by
BioMeriéux, as provided in Section 17.1.

 

4.1.10     Development Teams.   Each Party will assign to its development team
qualified personnel with the appropriate skills and experience to accomplish the
work established in the Work Plan or to otherwise achieve the goals of the Joint
Development Program, which persons shall be reasonably acceptable to the other
Party.  It is expected that such teams will work together to accomplish the
goals of the Joint Development Program including, if appropriate, conducting
efforts at the same facility. The day-to-day development activities shall be
conducted under the joint direction and supervision of such individuals as each
Party designates as appropriate for the management of the Particular Development
Project (the “Project Managers”). The Project Managers shall be the primary
contacts for the Parties with respect to the development activities.  The
Parties’ respective Project Managers and other scientific and technical
personnel necessary for the conduct of the development activities (the “Key
Personnel”), and the estimated percentage of time that each category of worker
shall devote to the development activities, shall be listed in the Work Plan. To
the extent within Cepheid’s reasonable control and budgetary constraints,
Cepheid shall not substitute persons for the Key Personnel or materially reduce
the time commitment of any Key Personnel to the development activities if doing
so would adversely affect the successful completion of the Work Plan without the
prior approval of BioMeriéux, which approval with respect to the Key Personnel
shall not be unreasonably withheld.

 

4.2          Joint Steering Committee.

 

4.2.1       Purpose.  A joint steering committee shall be established to oversee
the Joint Development Program established by this Agreement (“Joint Steering
Committee”). The duties of the Joint Steering Committee will include, but not be
limited to, the following:

 

(i)            General oversight of all aspects of the Joint Development
Program, including definition, development, and manufacturing;

 

(ii)           Development and implementation of the Work Plan;

 

(iii)          Development and approval of budgets;

 

(iv)          Development of a change order process to monitor and approve
changes and expenditures relative to the budget;

 

(v)           Organization of development teams and general oversight of their
activities;

 

(vi)          Providing an initial forum for the resolution of disputes arising
in connection with any Joint Development Program and in connection with
inventorship in connection with patents; and

 

(vii)         Providing a forum for monitoring the exchange of Confidential
Information and providing administration for the filing of patent applications
pursuant to Section 10.2 and notices required thereunder.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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4.2.2       Membership.  The Joint Steering Committee will be comprised of three
(3) employees from Cepheid and three (3) employees from BioMeriéux.  A Party’s
members of the Joint Steering Committee will be appointed by the Party at its
sole discretion.  The Joint Steering Committee will be chaired in the first year
by a senior representative from BioMeriéux, and thereafter on a rotating annual
basis, by a senior representative from BioMeriéux or Cepheid.  The Parties will
appoint their respective members of the Joint Steering Committee, and each Party
shall have the right to substitute its members at any time upon reasonable
written notice to the other Party. Each Party will disclose such members to the
other Party in writing, promptly after the Effective Date.

 

4.2.3       Meetings.  The Joint Steering Committee will meet as often as is
reasonably necessary to accomplish its purpose but at least quarterly, on a
mutually agreeable date and at a place selected initially by Cepheid, and then
by each Party in turn thereafter. Notwithstanding the preceding sentence, in the
event BioMeriéux is requested to pay travel expenses of Cepheid’s
representatives, BioMeriéux will be entitled to designate the place of meeting. 
Representatives of either Party, or both, in addition to members of the Joint
Steering Committee, may attend such meetings at the invitation of either Party. 
The Joint Steering Committee may hold meetings by teleconference or
videoconference if they mutually agree.  At each meeting, the Party whose member
is not the Chairman of the meeting will appoint a Secretary to record the
minutes of the meeting.

 

4.2.4       Joint Steering Committee Decisions and Dispute Resolution.  A quorum
for the conduct of business at meeting of the Joint Steering Committee shall
consist of at least two members from each Party.  Decisions by the Joint
Steering Committee shall be made, and action shall be taken, by the vote of a
majority the members present at any meeting at which there is a quorum;
provided, however, the Chair shall have the final right of decision with respect
to any issue about which the members of the Joint Steering Committee are
deadlocked. The Party who did not appoint the Chair shall have the right to
escalate any decision of the Chair for resolution by the Chief Executive Officer
of Cepheid and the President of BioMeriéux. Notwithstanding the foregoing, if
the Joint Steering Committee cannot decide inventorship under US law on patent
filing in accordance with Section 10, then the Parties shall agree on an
independent counsel who will be appointed to review and determine inventorship
based on such documentation and other information provided by the Parties. The
cost of such counsel shall be shared equally by the Parties.  

 

4.2.5       Records.  Significant decisions of the Joint Steering Committee,
such as decisions regarding budgets, shall be reflected in written minutes of
meetings that will be circulated to all Joint Steering Committee members for
review and comment before being filed as final records of the Joint Steering
Committee. Each member shall have ten (10) business days to provide such
comments in writing to the secretary, or such minutes shall be deemed acceptable
in form to any member who fails to respond in such period.

 

4.2.6       Expenses.  BioMeriéux will each bear all reasonable travel expenses
of both Parties’ respective members related to their participation on the Joint
Steering Committee and any travel expenses incurred by Cepheid shall be in
accordance with BioMeriéux’s then current travel policy.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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4.2.7       Termination of Joint Development Program.  BioMeriéux reserves the
right to terminate part or all of any Joint Development Program provided
BioMeriéux provides ninety days prior written notice. In the event that
BioMeriéux makes such election, it shall be responsible for paying all,
non-cancelable Development Costs actually incurred by Cepheid prior to the
effective date of such termination.

 

4.2.8       Limitations on Authority of Joint Steering Committee. Each Party to
this Agreement shall retain the rights, powers and discretion granted to it
under this Agreement, and no such rights, powers or discretion shall be
delegated to or vested in the Joint Steering Committee unless such delegation or
vesting of rights is expressly provided for in this Agreement or the Parties
expressly so agree in writing.  The Joint Steering Committee shall not have the
right to amend this Agreement, which may only be amended or modified as provided
in section 17.10.

 

5.             COMMERCIALIZATION AND REGULATORY MATTERS.

 

5.1          Commercialization Activities.  Except as otherwise expressly
provided in this Agreement, BioMeriéux shall have the right to decide and
conduct all matters with respect to, and shall be solely responsible for all its
costs and expenses in connection with, the development and commercialization of
Products that BioMeriéux elects to exploit hereunder (including with respect to
any required clinical trials related thereto); provided, however, that Cepheid
shall bear, and shall not be entitled to reimbursement for, any such costs or
expenses incurred by Cepheid prior to the Effective Date and, unless otherwise
expressly provided herein, any costs or expenses incurred by Cepheid in
performing its obligations under this Agreement.

 

5.2          Development and Commercialization Cooperation and Assistance by
Cepheid.

 

5.2.1       Cooperation and Assistance.  Following the completion of any
Development Program, Cepheid shall continue to cooperate with any and all
reasonable requests for assistance from BioMeriéux with respect to the
development and commercialization of the Products, and regulatory processes with
respect thereto, including by making its employees, consultants and other
scientific staff available upon reasonable notice during normal business hours
at their respective places of employment to consult with BioMeriéux on issues
arising during such development and commercialization.  BioMeriéux shall
compensate Cepheid for providing such assistance at Cepheid’s then current rates
for providing similar support services to Third Parties.

 

5.2.2       Invoices and Payments.  Within thirty (30) days after the end of
each calendar quarter, Cepheid shall invoice BioMeriéux for any services and
expenses incurred by Cepheid or its Affiliates in such quarter pursuant to
Section 5.2.1, which invoice shall be accompanied by reasonable supporting
documentation. Each invoice shall be payable by BioMeriéux to Cepheid within
forty five (45) days after receipt by BioMeriéux of such invoice and supporting
documentation and information. Such services will be billed at Cepheid’s then
normal rate for the type of personnel used. 

 

5.2.3       Books and Records.  Cepheid shall maintain complete and accurate
books, records and accounts that, in reasonable detail and in conformity with
GAAP, fairly reflect any service fees and expenses incurred by it or its
Affiliates. Such books, records and accounts shall be retained, and shall be
subject to audit, as provided in Section 17.1.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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5.3          Regulatory Approvals.

 

5.3.1       BioMeriéux Rights and Obligations.  Subject to the following
provisions of this Section, BioMeriéux shall have the sole right to develop the
appropriate strategy for obtaining and maintaining regulatory approvals for all
Products, developed or designed solely for use in the NASBA Field of Use (a
“NASBA-Field Product”).  Notwithstanding the foregoing, BioMeriéux shall consult
with Cepheid in the development of such strategy so as to avoid, to the extent
reasonably practicable, taking any regulatory position that would reasonably be
expected to endanger any pending applications for clearance of any other Cepheid
products, and BioMeriéux shall give due consideration to comments of Cepheid in
the development of its strategy. For purposes of clarification, however, it is
understood that any data collected by BioMeriéux that might indicate improved
performance of a NASBA-Field Product over any other Cepheid product shall not be
reason for Cepheid to object to BioMeriéux’s use of such data in an application
for regulatory clearance.  Cepheid agrees to assist and cooperate with
BioMeriéux in the preparation of regulatory applications and to make available
to BioMeriéux such information from Cepheid’s regulatory files, including
performance data, that could be used to support BioMeriéux’s regulatory
applications for the NASBA-Field Products. All FDA required marketing
authorizations (if any) and other filings, applications or requests pursuant to
or in connection with such regulatory approvals for such NASBA-Field Products
shall be made in the name of BioMeriéux or its designee, unless applicable law
requires that a regulatory approval be solely or jointly in the name of Cepheid
(or its Affiliates), in which case such filing, application or request shall be
made in the name of Cepheid (or its Affiliates) solely or jointly with
BioMeriéux, as permitted by applicable law and as BioMeriéux elects.  With
respect to any such filing, application or request made in the name of Cepheid,
and any such regulatory approval resulting therefrom, upon written request by
BioMeriéux, Cepheid shall, or shall cause its Affiliates to, as applicable,
assign such regulatory approval to BioMeriéux and take such further actions to
effect such assignment to the extent permitted by applicable law.

 

5.3.2       Cepheid Rights and Obligations.  Cepheid shall be responsible for
obtaining regulatory approvals for all Products other than the NASBA-Field
Products and for Cartridges for use with NASBA relating to Cepheid NASBA Test
options. The Parties shall consult and mutually agree on the strategy, plan and
filings for obtaining and maintaining regulatory approvals related to Products
that are intended to be marketed and sold in both the NASBA and Non-NASBA Fields
of Use (“Dual-Market Products”).  For avoidance of doubt, a Dual-Market Product
shall mean an Instrument that has loaded thereon at the same time software for
performing Tests in both the NASBA and non-NASBA Fields of Use.  Also, a
Cartridge that is not loaded with reagents will not be considered a Dual-Market
Product, even if the same empty Cartridge could be used for performing Tests in
both the NASBA and Non-NASBA Fields of Use when loaded with the proper
reagents.  Similarly, generic reagents that could be used in either the NASBA
Field of Use or the Non-NASBA Field of Use will not be considered Dual-Market
Products.  Cepheid will, upon request of BioMeriéux, promptly take all actions
and do all things necessary to obtain, or assist BioMeriéux with obtaining
authorization for marketing the Products in the European Union, including
compliance with the E. U. Directive for in vitro diagnostic products and
obtaining the “CE marking” for the NASBA-Field Products.

 

5.3.3       Costs of Regulatory Approvals.  BioMeriéux shall be responsible for
the costs of implementing its regulatory approval strategy for Products for
which it has regulatory responsibility under Section 5.3.1, and the costs of
obtaining such regulatory approvals, and shall reimburse Cepheid (to the extent
not addressed in the Work Plan) for all direct labor costs plus 10% and expenses
incurred by Cepheid at BioMeriéux’s request in

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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connection with such activities.  Cepheid shall be solely responsible for the
costs of obtaining regulatory approvals for any other Instruments or
Cartridges.   Except to the extent related exclusively to NASBA-Field Products,
Cepheid shall be responsible for the costs of obtaining and maintaining
marketing approval of Products in the EU.  BioMeriéux shall be responsible for
the costs of obtaining marketing approval in the EU for NASBA-Field Products

 

5.3.4       Communications with Regulatory Authorities.  The Parties’ respective
regulatory personnel shall consult with each other and decide upon the
appropriate manner, as well as the personnel, to be involved in communications
with regulatory authorities concerning any application for regulatory clearance
for NASBA-Field Products and Dual_Market Products.  To the extent reasonably
practicable, the Parties shall not take any position in any such communications
that would conflict with or be adverse to the other Party, and shall allow the
other Party to participate in such communications to the extent the Parties have
common interest with respect to such communications.  It is understood however
that the Party having regulatory responsibility for a particular Product shall
have the ultimate control over such discussions, but shall keep the other Party
advised of communications that may have an affect on the Products for which the
other Party has regulatory responsibility. 

 

6.             PAYMENTS AND ROYALTIES.

 

6.1          Payments.  Subject to the terms and conditions of this Agreement,
BioMeriéux agrees to pay to Cepheid the sum of [***] dollars ($[***]), as
provided below:

 

6.1.1       BioMeriéux shall pay to Cepheid [***] dollars (U.S. $[***]) on the
Effective Date of this Agreement, less any amounts that have been paid to
Cepheid prior to the Effective Date as a non-refundable option payment which can
be applied toward this initial payment.

 

6.1.2       BioMeriéux shall pay to Cepheid [***] dollars ($[***]) on or before
June 30, 2004.

 

6.1.3       BioMeriéux shall pay to Cepheid [***] dollars ($[***]) within thirty
(30) days after BioMeriéux’s launch (first commercial sale to an end user Third
Party) of a Product that contains Cepheid Technology in the NASBA Field of Use,
whether in the U.S. or another country.

 

6.1.4         The foregoing payments shall be non-refundable and non-cancelable,
and are not an advance or otherwise creditable against any royalties or other
payments required to be paid to Cepheid under the terms of this Agreement. 
Subject to the preceding sentence, such payments are intended as a pre-funding
of Cepheid’s future research and development efforts.  Cepheid shall
independently direct these funds toward (i) improvements to Cepheid Technology,
and resulting improvements shall be made available to BioMeriéux pursuant to the
license grants in Sections 3, and (ii) exploration of manufacturing efficiencies
from which BioMeriéux will benefit in connection with Cepheid’s supply of
Products pursuant to this Agreement. This payment is not payment for Joint
Development Program activities.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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6.2            Earned Royalties.

 

6.2.1       Cartridge [***].  BioMeriéux will pay Cepheid a [***] of [***]
([***]%) on all Net Sales of Cartridges (“Cartridge Royalty”) both before and
after BioMeriéux exercises its option to establish a Cartridge production line;
provided, however, if BioMeriéux exercises such option pursuant to this
Agreement, the foregoing royalty obligation shall cease upon expiration of the
last to expire of any Cepheid Patent that includes a Valid Claim covering the
Cartridge, its use, or the protocols performed therein.  After the expiration of
any such Patent, BioMeriéux shall thereafter have a fully paid license with
respect to the Cartridges.

 

6.2.2       Instrument Royalties.  Except at provided below, no royalty will be
due to Cepheid under Cepheid Patents with respect to BioMeriéux’s sales of
Instruments, and no royalties under Cepheid Patents or under Section 10.4
payable by Cepheid with respect to the Instruments shall be included in
Manufacturing Costs of the Instruments.  Notwithstanding the foregoing,
BioMeriéux will reimburse Cepheid for [***]% of royalties currently payable by
Cepheid to the [***] under Cepheid’s license to the [***] with respect to
Instruments sold by Cepheid to BioMeriéux, and will reimburse Cepheid for any
royalties agreed to in accordance with Section 10.4.  If BioMeriéux elects to
exercise its option to manufacture Instruments in accordance with Section 9.2,
BioMeriéux agrees to be responsible for payment of any royalties due to the
[***] under the [***] Patents with respect to Instruments manufactured by
BioMeriéux and any other royalties that may be due under Section 10.4.

 

7.             ROYALTY REPORTS AND ACCOUNTING.

 

7.1          Quarterly Earned Royalty Report.  Commencing with the calendar
quarter in which the first commercial sale of a Product occurs for which a
royalty is due pursuant to this Agreement, BioMeriéux thereafter shall make
written reports (even if there are no sales in subsequent quarters) and earned
royalty payments to Cepheid within forty-five (45) days after the end of each
calendar quarter.  These reports shall state the number, description, and
aggregate Net Sales of Products for which royalties are owed during such
completed calendar quarter, and resulting calculation pursuant to Section 6 of
earned royalty payments owed Cepheid for such completed calendar quarter. 
BioMeriéux also agrees to make a written report to the other Party within ninety
(90) days after the expiration of any licenses for which royalties are due to
Cepheid.

 

7.2          Books and Records; Audit.  Using a Party’s customary practices and
procedures in accordance with GAAP, each Party will keep and maintain proper and
complete records and books of account, sufficient in detail to enable the
verification of compliance with the obligations under this Section 7, including
without limitation, books relating to Net Sales, and subject royalties.  Without
limiting the foregoing, such records will show the manufacture, sale, use, and
other disposition of Products sold or otherwise disposed of under the licenses
herein granted.  Such records will include general ledger records showing cash
receipts and expenses, and records which include production records, customers,
serial numbers and related information in sufficient detail to enable the
royalties payable and Manufacturing Cost hereunder to be determined.  Such
records and books of account shall be retained, and shall be subject to audit,
as provided in Section 17.1.          

 

8.             SUPPLY OF PRODUCTS.

 

8.1          Supply Obligations.  Subject to the terms and conditions of this
Agreement, Cepheid shall supply BioMeriéux with, and BioMeriéux shall purchase
from

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Cepheid, BioMeriéux’s requirements of Products for use (i) in connection with
development activities, (ii) in connection with clinical trials, if any, and
(iii) in connection with BioMeriéux’s commercialization of the Products,
including HTS. Notwithstanding the foregoing, BioMeriéux may elect to provide to
Cepheid for use in the supply of any such Products, at BioMeriéux’s sole cost
and expense, quantities of one or more BioMeriéux Materials for use in the
manufacture of any such Products.

 

8.2          Third Party Suppliers.  In order to perform its supply obligations
under this Agreement, Cepheid may, at its election, subcontract with one or more
Third Parties reasonably acceptable to BioMeriéux for the supply of one or more
Products (each a “Third Party Supplier”).  Any agreement entered into for the
supply of Products in accordance with this Section 8.2 shall provide that the
Third Party Supplier shall supply the Product(s) in conformity with the warranty
provided in Section 8.8. Notwithstanding the foregoing, Cepheid shall be and
remain jointly and severally liable for the performance of such obligations
hereunder as it may subcontract to such Third Party Supplier. 

 

8.3          Manufacturing Cost. 

 

8.3.1       In General.  Cepheid shall sell each Product to BioMeriéux at a
price (on a per unit basis) equal to Cepheid’s Manufacturing Cost for such
Product, plus a percentage of such cost as set forth in Section 8.4 below (the
“Manufacturing Fee”).  BioMeriéux shall have the right, prior to providing a
forecast for a particular Product, to receive from Cepheid a good faith estimate
of the estimated Manufacturing Costs (the “Estimated Manufacturing Cost”) for
such Product, which estimate will be based upon BioMeriéux’s projected unit
volumes for Products for a three month period as provided to Cepheid at the time
of requesting this estimate. Cepheid shall provide such Estimated Manufacturing
Cost in writing within thirty (30) days of BioMeriéux’s request therefor.

 

8.3.2       Initial Manufacturing Cost.  No less than three (3) months prior to
the date for first delivery of a particular Product, BioMeriéux shall deliver to
Cepheid a twelve month forecast for such Product, the first three (3) months of
which shall be a binding order (per Section 8.5.1).  The initial Manufacturing
Cost of a given Product shall be calculated by Cepheid, based on such binding
order and also taking into account Cepheid’s own requirements of the same or
similar products (if any) during such three month period, and in accordance with
the definition of Manufacturing Cost (the “Initial Manufacturing Cost”).  Unless
otherwise agreed, the Initial Manufacturing Cost will apply until the end of the
first full calendar quarter in which the first Product is delivered.

 

8.3.3       Quarterly Recalculation of Manufacturing Cost.  At least fifteen
(15) days prior to the end of the calendar quarter to which the Initial
Manufacturing Cost applies, Cepheid will recalculate and notify BioMeriéux of
the Manufacturing Cost for the succeeding calendar quarter. Such recalculation
will be performed for each succeeding calendar quarter through the end of the
calendar year in which the sixth quarterly recalculation occurs (e.g, if the
Initial Manufacturing Cost is applicable in the first or second quarter of a
particular calendar year, the recalculation will occur on a quarterly basis
until the end of the following calendar year, but if the Initial Manufacturing
Cost is applicable in the third or fourth quarter of a particular calendar year,
the quarterly recalculation will continue until the end of the second succeeding
calendar year)  (the “Quarterly Recalculation Period”).  The Manufacturing Cost
for each such calendar quarter shall be determined as set forth in Section
8.3.2, using the then current three month forecasts.  Following the end of the
Quarterly Recalculation Period, the

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Manufacturing Cost shall be recalculated on an annual basis as sent forth in
Section 8.3.5 below.

 

8.3.4       Adjustments during Quarterly Recalculation Period. Within ten (10)
days after the end of the calendar quarter in which the Initial Manufacturing
Cost applies to a Product, and 10 days after the end of each succeeding calendar
quarter until the end of the calendar year specified in Section 8.3.3, Cepheid
will retroactively calculate and advise BioMeriéux of the actual Manufacturing
Cost of the Product, on a per unit basis as well as the cumulative total, for
the preceding quarter (or such period to which the Initial Manufacturing Cost
applied).  Cepheid’s notification to BioMeriéux of such actual Manufacturing
Cost shall be accompanied with detailed information of such actual costs and an
explanation of Cepheid’s calculations.  BioMeriéux will promptly review and
verify to its satisfaction that the computations are consistent with the method
agreed to and represents the costs for the quarter ended.  The Parties will
discuss any inconsistencies or discrepancies noted by BioMeriéux and engage in
good faith efforts to resolve such issues.  In the event the Parties are unable
to agree on a resolution, BioMeriéux may refer the issue for audit by an
independent accounting firm, reasonably acceptable to both Parties, whose
decision shall be binding concerning discrepancies from the agreed upon
methodology or errors in the computation and any necessary adjustments resulting
therefrom.  Any such audit shall be conducted in accordance with and subject to
the terms of Section 17.1 of this Agreement. In the event of a cost reduction,
the resulting decrease in the Manufacturing Cost plus Manufacturing Fee will be
reduced by [***]% of the reduction for that quarter.  In the event of a
Manufacturing Cost increase, the increase in the Manufacturing Cost plus
applicable Manufacturing Fee will be increased by [***]% of the increase for
that quarter.  For example, if the Manufacturing Cost decreases from $[***]/unit
to $[***]/unit, Cepheid’s Manufacturing Fee would be $[***]/unit at a
$[***]/unit cost and $[***]/unit for a $[***]/unit cost and vice versa for a
cost increase.  For avoidance of doubt, neither such a Manufacturing Cost
savings nor Manufacturing Cost increase will be carried forward from one quarter
to the next to affect the Manufacturing Fees in a subsequent quarter.  

 

8.3.5       Annual Recalculation of Manufacturing Cost.   Beginning at least
forty-five (45) days prior to the end of the Quarterly Recalculation Period, and
45 days prior to the end of each calendar year thereafter during which Cepheid
manufactures the particular Product for BioMeriéux, Cepheid will recalculate and
notify BioMeriéux of the Manufacturing Cost of such Product (on a per unit
basis) for the following calendar year.   The Manufacturing Cost for each such
calendar year shall be determined as set forth in Section 8.3.2, using the
forecast for the succeeding three month period.  Unless otherwise expressly
agreed in writing, this Manufacturing Cost shall apply to all such Products
ordered for delivery throughout the following calendar year.

 

8.3.6       Use of BioMeriéux Materials.  With respect to any materials or
components supplied by BioMeriéux (the BioMeriéux Materials) to Cepheid for use
in the manufacture of a Product, such fact shall reduce the Manufacturing Cost
by the amount of savings incurred by Cepheid with respect to the supply of such
material or component by BioMeriéux, but such savings shall not reduce Cepheid’s
Manufacturing Fee, which shall be calculated as if such material or component
had been manufactured or purchased by Cepheid at its normal price

 

8.3.7   Application of Price Indices.  Notwithstanding the foregoing provisions
of this Section 8.3, once the Parties are in the annual recalculation period of
any Product other than the HTS, if any indicated increase in the overhead
portion of the Manufacturing Cost, except for

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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increases due to regulatory and safety requirements, on a per unit basis, from
one year to the next year exceeds the greater of :

 

(a)                    the annual percentage increase in the Consumer Price
Index for the prior calendar year, as determined by the US Department of Labor,
Bureau of Labor Statistics (the “BLS”), covering “All Items for Urban Consumers”
for the applicable metropolitan area (currently San Francisco, Oakland, San Jose
area)-non-seasonally adjusted; or

 

(b)                   the annual percentage increase in the Producer Price Index
over the same period, as determined by the BLS, in the Diagnostic Apparatus
Industry (Code No. 3841#124);

 

then only one-half of such excess in the overhead costs shall be included in the
Manufacturing Cost.  For avoidance of doubt, increases in costs for direct labor
and materials will be passed through at actual cost without adjustment. 

 

With regard to the HTS, once the system has been developed, the Parties shall
negotiate in good faith a similar type mechanism related to the overhead element
of the [***] Manufacturing Cost structure.

 

In the event that the above limitation on increases in the overhead portion of
the Manufacturing Cost results in Cepheid having an actual transfer price of
Manufacturing Cost plus [***]% of Manufacturing Cost, or less, in a given year
for a Product covered by the limitation, the parties will negotiate in good
faith a restructuring of the transfer price to provide Cepheid with a reasonable
margin for that Product.

 

8.4          Transfer Prices.

 

8.4.1       Instruments.  Subject to Section 8.4.2, Cepheid shall manufacture
and sell each Instrument to BioMeriéux for a price equal to Cepheid’s
Manufacturing Cost for such Instrument plus a Manufacturing Fee of [***] percent
([***]%) of such cost.

 

8.4.2       [***].  Cepheid shall manufacture and sell the [***] to BioMeriéux
for a price equal to Cepheid’s Manufacturing Cost for the [***], plus the
following Manufacturing Fee:

 

(i) [***] percent ([***]%) of the Manufacturing Cost, if the capacity of the
[***] is below [***] Tests per hour;

 

(ii) [***] ([***]) percent of such cost, if the capacity of the [***] is at
least [***] Tests per hour, but not more than [***] Tests per hour;

 

(iii) [***] percent ([***]%) of such cost, if the capacity of the [***] is over
[***] Tests per hour.

 

Notwithstanding the foregoing, if BioMeriéux’s total payments (not including
BioMeriéux’s internal overhead or personnel costs) for goods and services paid
to Third Parties and to Cepheid for items included in the budget for the [***]
Joint Development Program, or otherwise as agreed to by the Steering Committee
in connection with the

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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[***] Joint Development Program, exceeds five million dollars ($5 million), the
Manufacturing Fee for the [***] shall be twenty percent (20%) of the
Manufacturing Cost, regardless of the hourly capacity.  The capacities stated
above (Tests per hour) refer to use of a 30 minute protocol for each Test.

 

8.4.3       Cartridges.  Cepheid shall manufacture and sell each Cartridge to
BioMeriéux for a price equal to Cepheid’s Manufacturing Cost for such Cartridge
plus a Manufacturing Fee of [***] percent ([***]%) of such cost (the “Cartridge
Transfer Fee”).  For the avoidance of doubt, BioMeriéux shall also pay Cepheid
the [***] required under Section 6.2.1 with respect to such Cartridges

 

8.4.4       Ancillary Disposables and Supplies.  Cepheid shall manufacture (or
obtain from Third Parties) and sell to BioMeriéux, Ancillary Disposables
intended for use with Cartridges in connection with the performance of a Test,
for a price equal to Cepheid’s Manufacturing Cost for such Ancillary Disposables
plus a Manufacturing Fee of forty percent (40%) of such cost.

 

8.4.5       Spare Parts.  Cepheid shall manufacture (or obtain from Third
Parties) and sell to BioMeriéux, Spare Parts for Instruments, for a price equal
to Cepheid’s Manufacturing Cost for such Spare Parts plus a Manufacturing Fee as
set forth below:;

 

(a) forty percent (40%) of the Manufacturing Cost, for Spare Parts for the Smart
Cycler and GeneXpert, and any Spare Parts that are common to the SmartCycler or
GeneXpert and the HTS;

 

(b) forty percent (40%) of the Manufacturing Cost, for Spare Parts used only in
the HTS, if the Manufacturing Fee for the [***] under Section 8.4.2 is 30% or
more;

 

(c)  thirty percent (30%) of the Manufacturing Cost, for Spare Parts used only
in the HTS, if the Manufacturing Fee under Section 8.4.2 is 20%.

 

8.4.6       Cartridge Fee Cap.  Notwithstanding anything to the contrary
contained in Sections 8.3 and this Section 8.4.6, in no event shall the sum of
the royalty payable by BioMeriéux with respect to a Cartridge under Section
6.2.1, and the twenty percent (20%) margin for such Product reflected in the
Cartridge Transfer Fee, exceed the amount that equals [***] percent ([***]%) of
BioMeriéux’s Net Sales price for such Product (the “Cartridge Fee Cap”),
provided that BioMeriéux’s Net Sales price for such Product is equal to or
greater than [***] dollars ($[***]) per unit.  For clarity, the Manufacturing
Cost for such Product shall not be considered in determining the Cartridge Fee
Cap.  If BioMeriéux’s Net Sales price for such Product is less than [***]
dollars ($[***]) per unit, the Parties shall negotiate in good faith a
commercially reasonable increase in the Cartridge Fee Cap.

 

8.5          Quantity; Forecasts; Orders.

 

8.5.1       Products.  No less than three (3) months prior to BioMeriéux’s
desired first shipment date for a particular Product, BioMeriéux shall deliver
to Cepheid a forecast for such Product for the subsequent twelve (12) month
period, the first three (3) months of which shall be deemed to be a binding firm
order (a “Firm Order”). Thereafter, prior to the beginning of the first month of
each three month Firm Order period, BioMeriéux shall deliver to Cepheid a
rolling twelve (12) month forecast, and the orders set forth therein for the
first three (3)

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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months shall be a Firm Order.  Each such Firm Order shall be accompanied by
instructions for delivery of such order and shall specify a delivery date for
such order, which date shall be in the next succeeding quarter. Cepheid shall
confirm to BioMeriéux in writing, within five (5) days after receipt thereof,
the receipt by Cepheid of such Firm Order, and shall be obligated to deliver the
specified quantity of Product in accordance with the delivery schedule set forth
in such Firm Order.  No subsequent forecast shall reduce the Firm Order portion
of an earlier forecast without the consent of Cepheid. BioMeriéux will be
entitled to increase the binding portion of a previous forecast and Cepheid
agrees to honor any such requested increase as follows: up to 10% for the second
month of the previous forecast (which will be the first month of the new Firm
Order period); up to 20% for the third month of the previous forecast (i.e., the
second month of the new Firm Order period);  provided, however, the binding
order portion of the succeeding forecast shall not exceed the quantity of the
prior Firm Order period by more than 50%  unless Cepheid agrees to be bound to
deliver such increased quantity. At Cepheid’s discretion, it may agree to use
commercially reasonable efforts to supply any further requested additional
increase in the binding orders, but unless Cepheid agrees otherwise, it shall
not be liable for its inability to do so.  In the event that the terms of any
Firm Order are not consistent with this Agreement, the terms of this Agreement
shall control.

 

8.5.2       Delivery and Risk of Loss.  Cepheid shall deliver the quantities of
Product(s) set forth in each Firm Order, to a location designated in writing by
BioMeriéux, FOB Cepheid’s facility.  Title to and risk of loss of such
Product(s) shall pass to BioMeriéux at the time of delivery to BioMeriéux’s
carrier.

 

8.5.3       Invoice and Payment.  Cepheid shall promptly invoice BioMeriéux for
all quantities of Product delivered in accordance herewith.  Invoices shall be
accompanied by a certificate of conformance certifying that such Product meets
the specifications for such Product. Subject to Section 8.9.2, payment with
respect to a shipment shall be due forty five (45) days after receipt by
BioMeriéux of all of such shipment of Products, as the case may be, and the
invoice and quality control records with respect thereto; provided, however,
that if BioMeriéux rejects such shipment pursuant to Section8.9.2, then payment
shall be due within forty five (45) days after resolution of any dispute between
the Parties resulting in a determination that the invoiced Product is conforming
or, subject to Section 8.9.2, receipt by BioMeriéux of replacement Product. In
the event of any inconsistency between an invoice and this Agreement, the terms
of this Agreement shall control. 

 

8.6          Product Improvements.  All improvements to Cepheid Technology that
are made generally available to Cepheid’s customers will be provided to
BioMeriéux at no additional cost to the prices set forth in this Section 8
(other than the additional cost to manufacture and supply such technology to
BioMeriéux which may be reflected in an increase in Cepheid’s Manufacturing
Costs). 

 

8.7          Minimum Cartridge Inventory.  Commencing six (6) months after the
date on which BioMeriéux provides to Cepheid a forecast with respect to
Cartridges pursuant to Section 8.5.1, at all times during the term of this
Agreement (and prior to the termination, if any, of the Parties’ respective
supply and purchase obligations with respect to such Product hereunder), each
Party shall maintain an inventory of at least two (2) months’ supply of

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Cartridges; provided that each Party’s obligation to maintain such supply shall
be conditioned on the other Party’s delivery or purchase, as applicable, during
the preceding six (6) month period of the full quantity of such Product
specified in Firm Orders covering such period.  A two (2) month supply of
Cartridges shall be equal to two thirds of the most recent Firm Order.

 

8.8          Warranty/Recall

 

8.8.1        Limited Warranty.  Cepheid warrants that, at the time of delivery
of each Product, as the case may be, to BioMeriéux:  (i) such Product will not
be adulterated or misbranded within the meaning of the United States Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq. as amended (the “FFDCA”);
(ii) such Product will have been manufactured, held and shipped in accordance
with any regulatory approvals (if any) for such Product, applicable good
manufacturing practices, FDA quality systems regulations, and all other
applicable U.S. law as well as the EU Directive for in vitro diagnostic products
with respect to Products to be sold in the EU); (iii) such Product will have
been manufactured, and be in conformity with the specifications for such Product
as agreed upon by the Parties and as set forth in the Product’s labeling
(“Specifications”), and will conform with the quality control records for such
Product provided pursuant to Section 8.5.3; (iv) that Instruments will remain in
conformity with such Specifications for a period of one (1) year after the date
of delivery to the end-customer, or 15 months from delivery to BioMeriéux
whichever is earlier,  (v) Cartridges,  will remain in conformity with such
Specifications for the period mutually agreed in writing by the Parties, but not
less than the time period specified in regulatory filings , (if any); (vi) title
to such Product will pass to BioMeriéux as provided herein free and clear of any
security interest, lien or other encumbrance; and (vii) such Product will have
been manufactured in facilities for which Cepheid holds ISO 13485 certification
and a valid establishment registration from FDA or other regulatory authorities
at the time of such manufacture, to the extent such registration is required by
applicable U.S. or EU law. The warranties set forth in clauses, (iv) and (v)
above will be void if the Product’s non-conformity is due to BioMeriéux’s
failure to store, ship, use or maintain in accordance with its specifications
and user manuals.

 

8.8.2  Warranty Repairs/ Replacement.  With respect to Instruments (e.g.,
SmartCycler, GeneXpert, and HTS) and Cartridges which become defective during
the applicable warranty period, the following shall apply:

 

Repairs On-Site.  If in BioMeriéux’s opinion, such defective Product can be
repaired or replaced at the customer’s site,  BioMeriéux will perform such
repair or replacement.  In such event, BioMeriéux shall be responsible for the
cost of labor, but Cepheid shall be responsible for the cost of the replacement
Product (or parts and materials) installed by BioMeriéux, including the cost of
all shipping costs.  In the event BioMeriéux uses a replacement Product or Spare
Part from its own inventory, Cepheid shall reimburse BioMeriéux for the purchase
price thereof, or at Bobcst’s option, grant a credit to BioMeriéux for the
purchase price thereof.

 

FACTORY REPAIRS.  IN THE EVENT IT IS NECESSARY TO RETURN DEFECTIVE PRODUCT TO
CEPHEID’S FACILITY FOR REPAIR DURING THE APPLICABLE WARRANTY PERIOD, THE
FOLLOWING SHALL APPLY:

 

(a) with respect to Cepheid’s SmartCycler or GeneXpert Products, Cepheid will
repair and/or replace such defective Products at Cepheid’s facilities and
Cepheid will pay all packing, shipping, freight, and insurance costs (“Shipping
Costs”) to return such repaired parts or Products, or such replacement parts or
Products, to BioMeriéux..

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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(b) with respect to the [***] Product, Cepheid will pay for all parts and
materials required to repair and/or replace such [***] Product and BioMeriéux
will reimburse Cepheid for its actual labor costs associated therewith. 
BioMeriéux will also be responsible for all Shipping Costs to send defective
[***] products or parts to Cepheid for repair or replacement.  Cepheid will pay
the Shipping Charges to return such repaired parts or Product, or such
replacement parts or Product, back from Cepheid to BioMeriéux.

 

(c) with respect to Cartridges, Cepheid will replace such Products and Cepheid
will pay all Shipping Costs to return such Products to BioMeriéux.  BioMeriéux
will be responsible for all Shipping Costs to send defective Cartridge products
to Cepheid.

 

For all shipments in connection with Cepheid’s foregoing obligations, (a)
Products that are located outside of Europe, including the U.S., will be shipped
to Cepheid’s Sunnyvale facility for repair or replacement, and products that are
located in Europe will be shipped to Cepheid’s Tolouse, France facility, and (b)
title and all risk of loss of or damage to the Products will pass from
BioMeriéux to Cepheid upon Cepheid’s receipt of such Products at the appropriate
facility set forth in the foregoing, subclause (a), and (c) title and all risk
of loss of or damage to the Products will pass from Cepheid to BioMeriéux upon
delivery by Cepheid to the carrier, freight forwarder or BioMeriéux, whichever
occurs first.

 

8.8.3  Recalls.  In the event of a recall of Products, whether initiated by
regulatory authorities or voluntarily, such recall will be handled by BioMeriéux
in accordance with its internal recall procedure, which procedure must be
consistent with the regulatory requirements of the applicable authority.  Each
Party agrees to notify the other promptly when such Party learns of any
information that may require a recall, and the Parties shall cooperate fully in
the conduct of such recall.  BioMeriéux shall be entitled to initiate a
voluntary recall, if in its reasonable opinion such recall is necessary and it
presents reasonable documentation of the reason for such recall.  BioMeriéux
shall be responsible for the costs of such recall to the extent such recall
arises from BioMeriéux’s willful and wrongful, or negligent, acts or omissions. 
To the extent the recall arises out of the breach of the foregoing warranties by
Cepheid, or from Cepheid’s willful and wrongful, or negligent, acts or
omissions, Cepheid shall reimburse BioMeriéux for its out of pocket expenses in
conducting such recall.  In the event of any dispute between the Parties
regarding a recall, including any dispute that relates to reimbursement of out
of pocket expenses, such dispute will be settle by mediation.

 

8.8.4       Limitation of Liability.  BioMeriéux’s sole and exclusive remedy
against Cepheid for breach of the foregoing warranties is set forth in this
Section 8.8 and Section 8.9.2; provided, however, this limitation shall not
affect the right of BioMeriéux to seek indemnity from Cepheid under Section
15.1.

 

8.9          Failure or Inability to Supply.

 

8.9.1       Notification of Inability to Supply.  In the event that Cepheid, at
any time during the term of this Agreement, shall have any reason to believe
that it will be unable to supply BioMeriéux in a timely manner and in conformity
with the specifications required for the certificate of conformance, with the
full quantity of any Product forecasted to be ordered or actually ordered by
BioMeriéux, Cepheid shall promptly notify BioMeriéux thereof.  Promptly
thereafter, the Parties shall meet to discuss how BioMeriéux shall obtain such
full

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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quantity of such conforming Product, as the case may be.  Compliance by Cepheid
with this Section 8.9.1 shall not relieve Cepheid of any other obligation or
liability under this Agreement, including any obligation or liability under
Section 8.9.2 or 8.9.3.

 

8.9.2       Failure to Supply Conforming Product.  In the event that BioMeriéux
determines that any Product supplied by Cepheid does not conform to the warranty
set forth in Section 8.8, BioMeriéux shall give Cepheid notice thereof, and
shall supply reasonable evidence of such non-conformity.  If within fifteen (15)
days thereafter Cepheid notifies BioMeriéux that it has not confirmed such
claimed non-conformity, either Party may submit the dispute for resolution
pursuant to Section17.6.1.  If however Cepheid agrees with the alleged
non-conformity, Cepheid shall proceed to repair or replace the applicable
Product pursuant to Section 8.8.2; or if as a result of such dispute resolution
process it is confirmed that a Product does not conform to the warranty set
forth in Section 10.8, Cepheid shall promptly at BioMeriéux’s request and
election either (i) repair or replace the applicable Product pursuant to Section
8.8.2, or (ii) reimburse BioMeriéux for any expenses of labor and parts in
making repairs that BioMeriéux has incurred which would have been the
responsibility of Cepheid. 

 

8.9.3       Other Supply Failures; Rights and Remedies.

 

8.9.3.1    If at any time, due to any circumstance other than a Cepheid
Bankruptcy Event or Change of Control, including an event of force majeure,
Cepheid is unable to supply the full quantity of any Product specified in a Firm
Order by the delivery date specified therein and in conformity with the warranty
set forth in Section8.8, Cepheid shall use its best efforts to supply to
BioMeriéux such Product and, at a minimum shall supply to BioMeriéux a pro-rata
share of Cepheid’s production output with respect to such Product during the
period covered by such Firm Order. 

 

8.9.3.2    Without limitation to anything in Section 8.9.3.1, in order to supply
shortfall quantities of any Product that BioMeriéux reasonably believes Cepheid
will be unable to supply either by the scheduled delivery date therefor or in
conformity with the warranty set forth in Section 8.8, BioMeriéux may, in its
sole discretion, request that Cepheid obtain such shortfall of Product from one
or more Third Parties Suppliers (if any) with which Cepheid has entered into a
subcontracting arrangement for such Product pursuant to Section 8.2 , and
Cepheid shall promptly use all commercially reasonable efforts to obtain such
supply from such Third Party Supplier. 

 

8.10        Amendment of Product Specifications and Manufacturing Process.

 

8.10.1     Rights and Limitations.  The parties agree to modify or supplement
the specifications or the manufacturing process for any Product to the extent
required to comply with applicable law or regulations. No other changes will be
made to the specifications or the manufacturing process for any Product without
the mutual agreement of the Parties which agreement will not be unreasonably
withheld.

 

8.10.2     Amendment to Regulatory Documentation; Costs and Expenses.  In the
event that the Parties agree to change the specifications or manufacturing
process for any Product in accordance with Section 8.11.1, Cepheid shall make
any required amendments to any required regulatory documentation for such
Product, and shall provide to BioMeriéux copies of any such regulatory
documentation or other information with respect thereto as BioMeriéux may
reasonably request.  BioMeriéux shall credit Cepheid for reasonable

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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costs that are actually incurred by Cepheid in connection with any such change
requested by BioMeriéux in future orders. Costs associated with changes required
by law or regulation shall be allocated in accordance with Section 5.3.

 

8.11        Testing and Quality Assurance.

 

8.11.1     Testing Requirements.  With respect to any Product manufactured or
supplied by or on behalf of Cepheid, Cepheid shall be responsible for the
performance of, and compliance with, testing required by the specifications, the
manufacturing processes and the agreed to regulatory approvals for such Product
and all applicable U.S. law.  Cepheid will implement and maintain such
reasonable additional processing control procedures, in addition to those
described above, as BioMeriéux may request and as Cepheid may agree, such
agreement not to be unreasonably withheld, provided that such requests do not
interfere with Cepheid’s standard procedures and BioMeriéux agrees to reimburse
Cepheid for all costs associated therewith.

 

8.11.2     Maintenance of Facilities.  Cepheid shall ensure, at its own expense,
that any and all necessary U.S and E.U (if applicable) regulatory approvals have
been obtained in connection with any facilities used in connection with the
manufacture of the Product by Cepheid.  Cepheid shall provide all equipment
required for purposes of manufacturing the Product. 

 

8.11.3     Quality Assurance Procedures.  Without limitation of the foregoing,
Cepheid agrees to implement, in connection with the manufacture of the Product,
quality assurance and quality control procedures, including validation
protocols, process change procedures and methods of statistical analysis, that
are at least as stringent as any contained in the specifications for such
Product.

 

8.12        Audit by BioMeriéux.  Cepheid agrees that BioMeriéux and its agents
(who have signed appropriate non-disclosure agreements) shall have the right,
upon reasonable prior notice to Cepheid and at a time to be reasonably agreed to
by the Parties (but in any event within 45 days of BioMeriéux’s request), in
accordance with BioMeriéux’s standard operating procedures for such audits of
vendor qualification and regulatory compliance, to audit any facility and audit
the manufacturing process for the Products manufactured pursuant to this
Agreement. Such audits shall not unreasonably interfere with Cepheid’s normal
business operations and shall take place no more frequently than one time per
year unless any audit reveals significant regulatory or other non-conformities
requiring corrective actions. Following such audit, BioMeriéux shall discuss its
observations and conclusions with Cepheid, and corrective actions, if any, shall
be agreed upon by BioMeriéux and Cepheid as soon as is reasonably possible
thereafter, with a goal of corrective action within thirty (30) days.  Cepheid
shall implement and cause any of its approved Third Party Suppliers to implement
such corrective action as soon as reasonably possible thereafter, with a goal of
corrective action being implemented by Third Party Suppliers within sixty (60)
days after the Parties reach such agreement.

 

8.13        Notification of Audits; Communications.  Cepheid shall notify
BioMeriéux in writing, within three (3) business days after receipt of notice
thereof, of any proposed or unannounced visit or inspection of any facility at
which a Product is manufactured, or of any manufacturing process used in
connection with the manufacture of a Product, by any regulatory authority.
Cepheid shall permit one BioMeriéux representative to be present for the portion
of the conclusory discussion of any such visit or inspection in which Cepheid
reasonably

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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expects to receive a material adverse outcome with respect to a NASBA Product. 
In the event BioMeriéux is unable to attend such discussion, Cepheid, shall at
the end of each day while such discussion continues, provide BioMeriéux a
summary of such discussions.  Cepheid shall provide to BioMeriéux a copy of any
report and other written communications received from such regulatory authority
in connection with such visit or inspection, and any written communications
received from such regulatory authority relating to a Product or any facility or
manufacturing process used in connection with the manufacture of a Product,
within three (3) business days after receipt thereof, and shall consult with
BioMeriéux concerning the response of Cepheid and any Third Party Suppliers to
each such communication provided a material impact on any Product is reasonably
expected.  Cepheid shall provide BioMeriéux with a copy of all draft responses
for comment as soon as possible and all final responses for review and comment,
which relate to a Product, within five (5) business days prior to submission
thereof.  Cepheid shall (and shall cause such Third Party(ies) to) give
reasonable consideration to any suggestions made by BioMeriéux with respect to
responses to communications from, and other submissions to, such regulatory
authorities.

 

8.14        Records.

 

8.14.1     Manufacturing Records.  Cepheid shall maintain, or cause to be
maintained, (i) all records necessary to comply with all applicable U.S. and
E.U.( if applicable) law relating to the manufacture of the Products, (ii) all
manufacturing records, standard operating procedures, equipment log books, lot
records, laboratory notebooks and all raw data relating to the manufacturing of
the Products, and (iii) such other records as BioMeriéux may reasonably agree. 
All such material shall be retained for such period as may be required by
applicable law or for such longer period as the Parties may agree.

 

8.14.2     Financial Records.  Cepheid shall also maintain, or cause to be
maintained, complete and accurate books, records and accounts that, in
reasonable detail, fairly reflect the calculation of the Manufacturing Cost of
each Product supplied hereunder, including all costs and expenses related
thereto, in sufficient detail to permit (i) Cepheid to calculate the
Manufacturing Cost with respect to such Product supplied to BioMeriéux for each
calendar quarter and calendar year and (ii) BioMeriéux to confirm the accuracy
of the calculation of any Manufacturing Fee invoiced hereunder.  Such books,
records and accounts shall be retained, and shall be subject to audit by
BioMeriéux, as provided in Section 17.1.          

 

8.15        Termination of Supply and Purchase Obligations.

 

8.15.1     BioMeriéux may, at its sole option, with or without cause, from time
to time terminate the supply and purchase obligations provided for by this
Section 8 with respect to one or more Products upon ninety (90) days’ prior
written notice to Cepheid; provided, however, that Cepheid and BioMeriéux shall
fulfill their respective supply and purchase obligations with respect to any
Firm Order received but not yet filled by Cepheid as of the date of termination,
including the completion of any work in progress with respect to any pending
orders. In the event of any such termination, BioMeriéux shall be responsible to
Cepheid for the actual cost of raw materials in Cepheid’s possession as of the
effective date of the termination pursuant to this section, which have been
acquired to timely deliver the units of the Products covered by BioMeriéux’s
forecasts which require more than 90 days to complete, not to exceed two (2)
months worth of such materials, which cannot otherwise be used by Cepheid in the
ordinary course of business (excluding, however, any material that is outdated
or obsolete).  Cepheid will ship such materials as may be requested to
BioMeriéux in accordance with BioMeriéux’s

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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shipping instructions and at BioMeriéux’s expense.

 

8.15.2     Without limitation of Section 8.15.1, in the event that BioMeriéux
exercises its rights to manufacture Instruments or Cartridges in accordance with
the terms of Section 9, BioMeriéux may, at its sole option, terminate the supply
and purchase obligations provided for by this Section 8 with respect to
Instruments or Cartridges as applicable, upon written notice to Cepheid;
provided, however, that Cepheid and BioMeriéux shall fulfill their respective
supply and purchase obligations with respect to any Firm Order received but not
yet filled by Cepheid as of the date of termination, including the completion of
any work in progress with respect to any pending orders. In the event of any
such termination, BioMeriéux shall not be responsible to Cepheid for the cost of
raw materials in Cepheid’s possession as of the effective date of the
termination pursuant to this section, except for any materials with lead times
extending beyond four months which Cepheid has purchased in accordance with
written agreement with BioMeriéux but which cannot be completely consumed in
production of Products covered by Firm Orders and are not obsolete or otherwise
unsuitable for use in Products and which cannot otherwise be used by Cepheid in
the ordinary course of its business. In no event shall BioMeriéux be responsible
for more than two months’ supply of any such material.  At BioMeriéuxs’s request
and expense, Cepheid will ship such materials as may be requested to BioMeriéux
in accordance with BioMeriéux’s shipping instructions and at BioMeriéux’s
expense.

 

8.15.3     Upon expiration or earlier termination of the supply and purchase
obligations provided for by this Section 8 with respect to a Product:

 

8.15.3.1         Cepheid shall, and shall cause any Third Party Suppliers to,
promptly deliver to BioMeriéux copies of all records and materials in their
possession or control (i) containing, comprising or describing any Confidential
Information of BioMeriéux with respect to such Product, or (ii) describing the
specifications or the manufacturing processes for such Product which has been
developed by BioMeriéux or developed by Cepheid or jointly by Cepheid and
BioMeriéux under the Joint Development Program ; and

 

8.15.3.2         the license granted to Cepheid by BioMeriéux under Section 3.5
shall terminate with respect to such Product, as the case may be.

 

9.             BIOMERIÉUX’S PRODUCTION LINE OPTIONS.

 

9.1          Cartridges.

 

9.1.1       Production Line Option.  Subject to the Cartridge Option Payment set
forth in Section 9.1.2 and subject to Section 9.1.6, BioMeriéux shall have the
option to elect to [***], including, to [***]  (the “Cartridge Production Line
Option”), upon the earlier to occur of the following: (i) BioMeriéux achieving
sales of [***] million cartridges in any twelve (12) consecutive month period;
or (ii) [***].  

 

9.1.2       Option Payments.  In order to exercise its Cartridge Production Line
Option, BioMeriéux will send Cepheid written notice of its intent, together with
its payment

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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of [***] dollars ($[***]) for such option (the “Cartridge Option Payment”).  In
addition, BioMeriéux will be required to continue paying Cepheid the Cartridge
Earned Royalties on Net Sales of Cartridges produced by BioMeriéux as set forth
in Section 6.2.1. 

 

9.1.3       Manufacturing Transfer. Upon BioMeriéux’s exercise of the option set
forth in Section 9.1.1 or 9.1.6 (other than in the event of a Chapter 7
Bankruptcy), (i) Cepheid shall within a reasonable time, but in no event more
than 60 days, transfer all documentation and manufacturing Know-how as necessary
or useful to enable BioMeriéux (or its designee) to manufacture Products
including any and all necessary or useful documents, including without
limitation: raw materials lists, vendor lists, plans, schematics, drawings, and
(ii) Cepheid shall reasonably cooperate with BioMeriéux and provide to
BioMeriéux (or its designee) access to Cepheid personnel and such technical
assistance as BioMeriéux may reasonably require to establish manufacturing
capabilities and facilities with respect to Products. Any Manufacturing Transfer
Costs associated with Cepheid performing the activities described in this
Section 9.1.3 in connection with BioMeriéux’s exercise of the Instrument Option
set forth in Section 9.2 shall be paid by BioMeriéux.

 

9.1.4       Costs for Cartridge Production Line.  BioMeriéux will be responsible
for all costs associated with performing the activities described in Section
9.1.3 related to the Cartridge production line except that Cepheid will cover up
to $[***] of its Manufacturing Transfer Costs associated with such activities. 
All Manufacturing Transfer Costs in excess of [***] dollars ($[***]) will be
billed to and paid by BioMeriéux, subject to reasonable documentation of such
costs. Prior to incurring any such additional costs and expenses Cepheid will
provide written documentation regarding the Manufacturing Transfer Costs
incurred to date together with a notice to BioMeriéux, and a detailed estimate
thereof, and BioMeriéux will inform Cepheid in writing if it desires to have
Cepheid incur such additional costs and expenses.  Cepheid’s responsibilities
under this Section 9.1.4 shall relate to one manufacturing line only, and
Cepheid will have no responsibilities under this Agreement to BioMeriéux in
regard to any additional manufacturing lines that BioMeriéux may wish to
establish.

 

9.1.5       Cartridge Production Line Restrictions.  If BioMeriéux exercises its
Cartridge Production Line Option, BioMeriéux’s right to manufacture Cartridges
will be limited to manufacturing Cartridges for sale under its own label within
the NASBA Field of Use and not for any Third Party for sale under a Third Party
label or outside the NASBA Field of Use.  In addition, BioMeriéux will not
authorize any Third Party to manufacture Cartridges for any person or entity
besides BioMeriéux and BioMeriéux will not allow a Third Party to manufacture
Cartridges for BioMeriéux without Cepheid’s (or any Cepheid successor’s) prior
written consent.

 

9.1.6       Change of Control or Bankruptcy.  In the event of Cepheid’s Change
of Control or a Bankruptcy Event with respect to Cepheid, BioMeriéux, provided
it is not in material default under this Agreement, shall have the right to
exercise its Cartridge Production Line Option prior to [***] regardless of the
level of production demand. If, under the above circumstances described in this
Section 9.1.6, BioMeriéux elects to exercise the Cartridge Production Line
Option prior to [***], (a) BioMeriéux will render a payment of $[***] within
seven days after the date of BioMeriéux’s production of the first Cartridge for
commercial sale instead of the required $[***] dollar payment to Cepheid under
Section 9.1.2, and (b) BioMeriéux will be required to pay Cepheid the Cartridge
Earned Royalties on sales of Cartridges manufactured by BioMeriéux, as set forth
in Section 6.2.1.  If BioMeriéux elects to exercise its Cartridge Production
Line Option in accordance with this Section 9.1.6, (x) the restrictions in

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Section 9.1.5 will remain in effect, and (y) Cepheid will not be responsible for
any Manufacturing Transfer Costs.

 

9.2          Instruments.  In the event of Cepheid’s Change of Control or a
Bankruptcy Event, Cepheid will use all reasonable commercial efforts to continue
to supply BioMeriéux with Instruments on substantially similar terms and
conditions, including pricing, as BioMeriéux received prior to Cepheid’s Change
of Control or Bankruptcy Event.  In the event that (a) Cepheid becomes the
debtor in a case under Chapter 7 of Title 11, U.S. Code  (the “Bankruptcy Code”)
or (b) Cepheid both (i) becomes the debtor in a case under Chapter 11 of the
Bankruptcy Code and (ii) is unable to meet BioMeriéux’s forecasted demand for
Instruments for a period of one hundred twenty (120) continuous days, then in
case of either (a) or (b), BioMeriéux will have the option of establishing its
own manufacturing production line for Instruments (the “Instrument Production
Line Option”). The Instrument Production Line Option shall be exercised by
BioMeriéux’s submission of written notice thereof to Cepheid, but BioMeriéux’s
right to produce and sell Instruments thereunder shall be subject to
BioMeriéux’s payment of $[***] (the “Instrument Option Payment”), which payment
shall be due and payable within seven days after the production of the first
Instrument for commercial sale.   If BioMeriéux elects to exercise its
Instrument Production Line Option, (x) the same restrictions in Section 9.1.5
applicable to Cartridges will apply to BioMeriéux’s option to manufacture
Instruments, (y) Cepheid will not be responsible for any Manufacturing Transfer
Costs, and (z) BioMeriéux will pay any Instrument royalties due under [***] 
Patents and any other royalties required by the licenses under Section 10.4.

 

10.          GENERAL INTELLECTUAL PROPERTY.

 

10.1        Ownership of Intellectual Property.

 

10.1.1     Background Cepheid Intellectual Property.  Subject to the terms and
conditions of this Agreement, all rights, title and interest in and to
Background Cepheid Intellectual Property , whether patentable or copyrightable
or not, will belong to and be retained by Cepheid.

 

10.1.2     Background BioMeriéux Intellectual Property.  Subject to the terms
and conditions of this Agreement, all rights, title and interest in and to
Background BioMeriéux Intellectual Property, whether patentable or copyrightable
or not, will belong to and be retained by BioMeriéux.

 

10.1.3     BioMeriéux Collaboration Patent Rights.   All rights, title and
interest in and to BioMeriéux Collaboration Patent Rights shall belong to and be
retained by BioMeriéux.  Except as otherwise provided in this Agreement, Cepheid
covenants and agrees not to make, have made, use, sell, offer to sell, import,
distribute, license or otherwise exploit the BioMeriéux Collaboration Patent
Rights.  Upon Cepheid’s request, BioMeriéux will enter into good faith
negotiations with Cepheid to discuss a non-exclusive, royalty-bearing license
for Cepheid to have rights outside the NASBA Field of Use to BioMeriéux
Collaboration Patent Rights, with all rights reserved by BioMeriéux as to the
terms and conditions of any such license granted to Cepheid.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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10.1.4     Cepheid Collaboration Patent Rights.   All rights, title and interest
in and to Cepheid Collaboration Patent Rights shall belong to and be retained by
Cepheid.  Notwithstanding the foregoing sentence, BioMeriéux shall have rights
in Cepheid Collaboration Patent Rights in the NASBA Field of Use pursuant to
Section 3 of this Agreement, including the right to sub-license in the NASBA
Field of Use, without the requirement to account or share royalties with
Cepheid.  Except as otherwise provided in this Agreement, BioMeriéux covenants
and agrees not to make, have made, use, sell, offer to sell, import, distribute,
license or otherwise exploit the Cepheid Collaboration Patent Rights outside the
NASBA Field of Use.  Upon BioMeriéux’s request, Cepheid will enter into good
faith negotiations with BioMeriéux to discuss a non-exclusive, royalty-bearing
license for BioMeriéux to have rights outside of the NASBA Field of Use to
Cepheid Collaboration Rights, with all rights reserved by Cepheid as to the
terms and conditions of any such license granted to BioMeriéux.

 

10.1.5     Collaboration Joint Patent Rights. 

 

10.1.5.1      Ownership.  All rights, title and interest in and to Collaboration
Joint Patent Rights, whether patentable or copyrightable or not, will belong
jointly to BioMeriéux and Cepheid and will be subject to the terms and
conditions of this Agreement. 

 

10.1.5.2      BioMeriéux’s Rights To Practice.  BioMeriéux will have the
exclusive, worldwide right to independently practice and sub-license the
Collaboration Joint Patent Rights in the NASBA Field of Use, without accounting
to Cepheid or paying a royalty therefore pursuant to this Agreement.  Subject to
the terms and conditions of this Agreement, BioMeriéux covenants and agrees not
to: (a) make, have made, use, sell, offer to sell, import, distribute, license
or otherwise exploit the Collaboration Joint Patent Rights outside the NASBA
Field of Use without Cepheid’s prior written consent or (b) sell, encumber, or
otherwise transfer or otherwise dispose of its interest in the Collaboration
Joint Patent Rights without Cepheid’s prior written consent. Upon BioMeriéux’s
request, Cepheid will enter into good faith negotiations with BioMeriéux to
discuss a non-exclusive, royalty-bearing license for BioMeriéux to have rights
outside of the NASBA Field of Use, with all rights reserved by Cepheid as to the
terms and conditions of any such license granted to BioMeriéux. 

 

10.1.5.3      Cepheid’s Rights To Practice. Cepheid will have the exclusive,
worldwide right to independently practice and sub-license Collaboration Joint
Patent Rights outside of the NASBA Field of Use, without accounting to
BioMeriéux.   Subject to the terms and conditions of this Agreement, Cepheid
covenants and agrees not to make, have made, use, sell, offer to sell, import,
distribute, license or otherwise exploit the Collaboration Patent Rights in the
NASBA Field of Use without BioMeriéux’s prior written consent. 

 

10.1.6     Cepheid’s Incorporation of BioMeriéux Background Intellectual
Property; BioMeriéux Collaboration Patent Rights into Cepheid Instruments or
Cartridges Developed during Collaboration Joint Development Programs.  
Notwithstanding the provisions of Section 10 of this Agreement, in the following
restricted circumstances, Cepheid will have access to BioMeriéux Background
Intellectual Property and BioMeriéux Collaboration Patent Rights as provided
below.

 

10.1.6.1      Notice of Changes to Cartridges and Instruments Under Work Plan.
Cepheid shall provide BioMeriéux with notice comprising a written description
(“Written Description”) of changes to Cartridges and Instruments developed under
the Work Plan(s) to permit BioMeriéux to ascertain if such changes fall under
BioMeriéux

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Background Intellectual Property or BioMeriéux Collaboration Patent Rights at
least 90 (ninety) days prior to the inclusion of such changes into the
Cartridges and Instruments developed under the Work Plan(s).   Additionally,
Cepheid will use all commercially reasonable efforts efforts to review changes
to Cartridges and Instruments in light of the information about BioMeriéux
Collaboration Patent Rights and BioMeriéux Background Intellectual Property that
BioMeriéux provides to Cepheid during the Joint Development Program and under
Section 10.1.6.2 of this Agreement. 

 

10.1.6.2             Inclusion of BioMeriéux Collaboration Patent Rights and
BioMeriéux Background Intellectual Property. 

 

10.1.6.2.1          Based on the Written Description provided by Cepheid to
BioMeriéux under Section 10.1.6.1, if BioMeriéux determines that Cepheid’s
practice of the changes to Cartridges and Instruments developed during the Work
Plan of the Joint Development Program will require rights under Background
BioMeriéux Intellectual Property or BioMeriéux Collaboration Patent Rights,
BioMeriéux will notify Cepheid in writing prior to Cepheid’s inclusion of such
Intellectual Property or Patent Rights in a Product. 

 

10.1.6.2.2          Cepheid will notify BioMeriéux if the changes to Cartridges
and Instruments are believed to fall under BioMeriéux Collaboration Patent
Rights or Collaboration BioMeriéux Intellectual Property prior to the inclusion
of such Intellectual Property or Patent Rights in a Product. 

 

10.1.6.2.3          If under either Section 10.1.6.2.1 or Section 10.1.6.2.2
BioMeriéux determines that the changes to the Cartridges or Instrument fall
under BioMeriéux Collaboration Patent Rights or Collaboration BioMeriéux
Intellectual Property, then BioMeriéux will inform Cepheid with particularity of
the basis for such determination and identify the patent or other property
involved. If Cepheid determines that it wishes to acquire a license from
BioMeriéux, then BioMeriéux will use good faith efforts to negotiate a
reasonable royalty with Cepheid for such intellectual property.   If the Parties
cannot agree upon a reasonable royalty for such Background BioMeriéux
Intellectual Property or BioMeriéux Collaboration Patent Rights, then Cepheid
may, in its sole discretion, (a) refuse to include such intellectual property in
the Products or (b) include such intellectual property in the Products knowing
that Cepheid will either have to (x) pay BioMeriéux a royalty for such
intellectual property or (y) not practice such intellectual property when it
exploits the Products outside of the NASBA Field of Use.   Without limiting the
foregoing, in no event will Cepheid be required to pay BioMeriéux royalties for
BioMeriéux know-how, technical information, techniques, processes, methods,
data, assays, or any other information in its possession that is or becomes
generally available to the public through no fault of Cepheid.   

 

10.1.6.2.4          Conditioned upon Cepheid providing a Written Description as
required pursuant to Section 10.1.6.2.1, if BioMeriéux fails to inform Cepheid
in writing in a timely manner that Cepheid’s practice of the changes to
Cartridges or Instruments made under the Work Plan during the Joint Development
Program(s) infringe either the BioMeriéux Collaboration Patent Rights or
Background BioMeriéux Intellectual Property prior to Cepheid’s inclusion of such
intellectual property in Products, then Cepheid will not be required to pay
BioMeriéux any royalties or any other consideration for such intellectual
property.

 

10.1.6.2.5          If Cepheid fails to provide BioMeriéux with Written
Description of changes to Cartridges or Instruments made under the Work Plan
during

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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the Joint Development Program(s)  or otherwise fails to notify BioMeriéux of
Cepheid’s belief that BioMeriéux Intellectual Property may be relevant prior to
the inclusion of such changes, and BioMeriéux later determines that such changes
infringe either Background BioMeriéux Intellectual Property or Collaboration
BioMeriéux Patent Rights with Cepheid’s activities outside the NASBA Field of
Use, then BioMeriéux will enter into good faith negotiations with Cepheid for a
license to such intellectual property outside the NASBA Field of Use.  If the
Parties fail to reach a license agreement with reasonable commercial terms, then
BioMeriéux reserves all rights to enforce Intellectual Property and Patent
Rights against Cepheid

 

10.1.6.2.6          Subject to the terms and conditions of this Agreement,
Cepheid covenants and agrees not to: (a) make, have made, use, sell, offer to
sell, import, distribute, license or otherwise exploit the Collaboration Joint
Patent Rights in the NASBA Field of Use (except as set forth herein to supply
Products to BioMeriéux) without BioMeriéux’s prior written consent or (b) sell,
encumber, or otherwise transfer or otherwise dispose of its interest in the
Collaboration Joint Patent Rights without BioMeriéux’s prior written consent.

 

10.2        Filing of Patent Applications. 

 

10.2.1     Notice of Patent Filings.   The Parties will use commercially
reasonable efforts to keep each other informed of invention disclosures invented
under the Work Plan of the Joint Development Program (“Invention Disclosures”)
prior to filing a patent application based on such Invention Disclosures
(“Patent Applications”), time permitting.  The Parties shall prepare an updated
patent schedule of Invention Disclosures and Patent Applications (“Patent
Schedule”) at least once per year for the Joint Steering Committee during the
term of the Joint Development Program.   Once the Joint Development concludes,
each Party will provide an updated Patent Schedule to the other Party upon
request.

 

10.2.2     Collaboration Cepheid Patent Applications . 

 

10.2.2.1      Cepheid will have the first right, using in-house or outside legal
counsel selected in Cepheid’s sole discretion, to prepare, file, prosecute,
maintain and extend Patent Applications for Collaboration Cepheid Intellectual
Property in countries of Cepheid’s choosing.  Cepheid will bear all costs
relating to such activities. Cepheid will provide BioMeriéux a copy of such
Patent Applications, and Cepheid will take into consideration BioMeriéux’s
advice thereon, but whether to implement such advice shall be in Cepheid’s sole
discretion. 

 

10.2.2.2      If Cepheid elects not to prepare, file, prosecute or maintain
certain of the Patent Applications in one or more countries, and rights of such
Patent Applications are not dominated by Cepheid Background Intellectual
Property, then Cepheid will give BioMeriéux notice thereof within a reasonable
period prior to allowing the patents to lapse or become abandoned or
unenforceable, and BioMeriéux will thereafter have the right, at its sole
expense and discretion, to prepare, file, prosecute, and maintain the patent
applications or, by means of continuations in part, divisionals or other
appropriate methods,  in the name of BioMeriéux in the one or more countries. 
Cepheid will, at BioMeriéux’s expense, assign the Patent Applications to
BioMeriéux and provide reasonable assistance to BioMeriéux to facilitate the
filing and prosecution of all the Patent Applications that Cepheid has elected
not to pursue, and Cepheid will execute all documents reasonably deemed
necessary or desirable by BioMeriéux therefor. Unless otherwise agreed by the
Parties in writing, BioMeriéux will provide

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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to Cepheid a [***] license, with right to [***], with the Field of Use
Restrictions consistent with Sections 3 and 10.1.4 of this Agreement, under all
the Patent Applications that Cepheid has elected not to pursue and BioMeriéux
has elected to pursue under this Section 10.2.2.2. 

 

10.2.2.3      BioMeriéux and Cepheid will each hold all information it presently
knows or acquires from the other under this Section 10.2.2 as Confidential
Information in accordance with Section 12.

 

10.2.3     Collaboration BioMeriéux Patent Applications. 

 

10.2.3.1      BioMeriéux will have the first right, using in-house or outside
legal counsel selected in BioMeriéux’s sole discretion, to prepare, file,
prosecute, maintain and extend Patent Applications for Collaboration BioMeriéux
Intellectual Property in countries of BioMeriéux’s choosing.  BioMeriéux will
bear all costs relating to such activities.  BioMeriéux will provide Cepheid
with a copy of the Patent Applications, and BioMeriéux will take into
consideration Cepheid’s advice thereon, but whether to implement such advice
shall be in BioMeriéux’s sole discretion. 

 

10.2.3.2      If BioMeriéux elects not to prepare, file, prosecute or maintain
certain of the Patent Applications in one or more countries, and rights of such
Patent Applications are not dominated by BioMeriéux Background Intellectual
Property, BioMeriéux will give Cepheid notice thereof within a reasonable period
prior to allowing the patents to lapse or become abandoned or unenforceable, and
Cepheid will thereafter have the right, at its sole expense and discretion, to
prepare, file, prosecute, and maintain the Patent Applications or, by means of
continuations in part, divisionals or other appropriate methods, in the name of
Cepheid in the one or more countries.  BioMeriéux will, at Cepheid’s expense,
assign said Patent Applications to Cepheid and provide reasonable assistance to
Cepheid to facilitate the filing and prosecution of all the patent applications
that BioMeriéux has elected not to pursue, and BioMeriéux will execute all
documents reasonably deemed necessary or desirable by Cepheid therefor.  Unless
otherwise agreed by the Parties in writing, Cepheid will provide to BioMeriéux a
royalty-free, worldwide, perpetual, non-exclusive license, with right to
sublicense, under all the Patent Applications that BioMeriéux has elected not to
pursue and Cepheid has elected to pursue under this Section 10.2.3. 

 

10.2.3.3      BioMeriéux and Cepheid will each hold all information it presently
knows or acquires from the other under this Section 10.2.3 as Confidential
Information in accordance with Section 12.

 

10.2.4     Collaboration Joint Patent Appications. 

 

10.2.4.1      Cepheid will have the first right, using in-house or outside legal
counsel selected in Cepheid’s sole discretion, to prepare, file, prosecute,
maintain and extend Patent Applications for Collaboration Joint Intellectual
Property in countries of the Cepheid’s choosing. Cepheid will bear all costs
relating to such activities although BioMeriéux and Cepheid will be joint
assignees to Patent Applications for Collaboration Joint Intellectual Property,
and BioMeriéux will cooperate with Cepheid to execute all necessary documents
for such Patent Applications and provide reasonable assistance to facilitate the
filing and prosecution of all the Patent Applications. Cepheid will provide
BioMeriéux with a copy of the Patent Application, and Cepheid will take into
consideration BioMeriéux’s advice thereon, but whether to implement such advice
shall be in Cepheid’s sole discretion. 

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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10.2.4.2      If Cepheid does not desire to file a Patent Application on the
Collaboration Joint Intellectual Property in one or more countries, then
BioMeriéux will thereafter have the right, at its sole expense, to prepare,
file, prosecute, and maintain the Patent Applications in its own name in the one
or more countries; and Cepheid will, at its own expense, assign said Patent
Applications to BioMeriéux and provide reasonable assistance to the Filing Party
to facilitate the filing and prosecution of all the patent applications that
Cepheid has elected not to pursue, and Cepheid will execute all reasonable
documents deemed necessary or desirable by the Filing Party therefore.  In such
cases, BioMeriéux will provide Cepheid with a royalty-free, worldwide, perpetual
non-exclusive license, with right to sublicense, with Field of Use restrictions
consistent with Section 3 and 10.1.4 of this Agreement, under all the Patent
Applications that the other Party has elected not to pursue and the Filing Party
has elected to pursue under this Section 10.2.4.2. 

 

10.2.4.3      BioMeriéux and Cepheid will each hold all information it presently
knows or acquires from the other under this Section 10.2.4 as Confidential
Information in accordance with Section 12.

 

10.3        Interfering Third Party Intellectual Property.  Both Parties shall
use reasonable commercial efforts to conduct freedom to operate studies for new
features to the Products contributed in the Joint Development Program by their
employees and consultants.  Such studies will be subject to attorney-client
privilege and due care will be taken by both Parties to preserve the privilege.
If a Party believes that any activities within the Joint Development Program
infringe any Intellectual Property Rights of a Third Party, that Party will
promptly notify the other Party, and the Joint Steering Committee will seek to
agree upon the appropriate response to be taken.

 

10.4        Third Party Licenses.

 

If (i) in the opinion of BioMeriéux or Cepheid, the exploitation of a Product in
any country would infringe one or more Patents owned by a Third Party or (ii) a
claim is made against BioMeriéux or any of its Affiliates or sublicensees
alleging that the exploitation of a Product by BioMeriéux, its Affiliates or any
of its sublicensees infringes or misappropriates any Patent or any other
intellectual property right of a Third Party in any country (each, a “Triggering
Event”), then the following shall apply:

 

(a) BioMeriéux and Cepheid shall cooperate to determine whether it is necessary
to obtain a license from such Third Party. 

 

(b) BioMeriéux and Cepheid shall abide by the following with respect to the
party responsible for negotiating any such license from such Third Party and the
party responsible for paying any payments or royalties associated with such
license:  

 

(b1) If the Parties mutually determine that it will be desirable to obtain a
license from such Third Party that will cover both Products sold by Cepheid to
BioMeriéux (hereinafter for the purposes of this Section 10.4, “BioMeriéux
Products”) and other products sold by Cepheid to Third Parties (“Cepheid
Products”), or if the license negotiation is in response to a claim described in
subparagraph 10.4(ii) above that will cover both BioMeriéux Products and Cepheid
Products, then Cepheid will negotiate the license.  If the resulting license
covers both Cepheid Products and BioMeriéux Products, then Cepheid will pay: (1)
any upfront payments associated with such license, subject to

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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the amortization rules described in subsection (c) below and (2) all royalties
due on such license, subject to reimbursement by BioMeriéux for any royalties
paid by Cepheid that are due from the sale of BioMeriéux Products. 

 

(b2) If the Parties mutually determine that a license from such Third Party will
only be needed with respect to BioMeriéux Products, then BioMeriéux may
negotiate such license with the Third Party, and BioMeriéux will be solely
responsible for the payment of any upfront payments and royalties associated
with such license.

 

(b3) If BioMeriéux concludes that a license from such Third Party is needed with
respect to BioMeriéux Products or both Cepheid Products and BioMeriéux products
and Cepheid does not agree that such license is needed, then BioMeriéux may
negotiate a license with the Third Party with respect to BioMeriéux Products and
BioMeriéux will be solely responsible for the payment of any upfront payments
and royalties associated with such license.

 

(b4) If Cepheid concludes that a license from such Third Party is needed with
respect to both Cepheid Products and BioMeriéux Products and BioMeriéux does not
agree that such license is needed, Cepheid may negotiate a license with the
Third Party and Cepheid will be responsible for the payment of any upfront
payments and royalties associated with such license. However, if Cepheid intends
to negotiate a license that would cover BioMeriéux Products, then BioMeriéux may
elect to submit the issue of whether a license is needed with respect to
BioMeriéux Products to a mutually acceptable independent patent attorney. If in
the opinion of such attorney no license is needed for the BioMeriéux Products,
then BioMeriéux shall not be responsible for upfront payments or royalties paid
by Cepheid.  If such patent attorney agrees with Cepheid, and the resulting
license covers both Cepheid Products and BioMeriéux products, then Cepheid will
pay any upfront payments associated with such license, subject to the
amortization rules described in subsection (c) below and Cepheid will pay all
royalties due on such license, subject to reimbursement by BioMeriéux for any
royalties paid by Cepheid that are due from the sale of BioMeriéux Products. In
the event that the resulting license does not include BioMeriéux Products, and
the Third Party asserts a claim for infringement against Cepheid with respect
thereto, such claim against Cepheid will be subject to indemnification by
BioMeriéux in accordance with Section 15.

 

(b5)   If Cepheid concludes that a license from such Third Party is needed with
respect to BioMeriéux Products only and not Cepheid Products and BioMeriéux does
not agree that such license is needed and does not seek such a license, then if
the Third Party asserts a claim for infringement against Cepheid with respect
thereto, such claim against Cepheid will be subject to indemnification by
BioMeriéux in accordance with Section 15.

 

(c) In those instances in which Cepheid makes upfront payments in connection
with any license, and is entitled to amortize and allocate a portion of such
payments to BioMeriéux, such amortization and allocation will be made as
follows:

 

(c1)The upfront payments will be amortized over the shorter of 10 years or the
life of the Third Party patent(s) which are the subject of the license.
BioMeriéux will reimburse Cepheid for its pro rata share of such upfront
payments as follows:

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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(c2) The amortization allocated to BioMeriéux in any particular quarter will be
the ratio of the number of applicable BioMeriéux Products shipped to BioMeriéux
during that quarter to the total number of applicable BioMeriéux Products and
Cepheid Products shipped by Cepheid to all customers during that quarter times
the total amortization for that quarter.

 

(c3) The amortization will be done in equal amounts for each quarter over the
amortization period.  For example, if the upfront fee is $100,000 and is
amortized over 10 years, it will be amortized at $2,500/quarter.  Assuming
Cepheid shipments during a particular quarter of 1,000 BioMeriéux Products and
1,000 Cepheid Products, BioMeriéux’s share of such $2,500 amortized payment
would be $1,250 (i.e., 1,000/2,000 x $2,500).

 

10.5        Patent Litigation.

 

10.5.1     Defense Against Third Party Claims; Sharing of Costs for Certain
Third Party Infringement Claims.  In the event of the institution of any suit by
a Third Party against Cepheid or BioMeriéux alleging that the manufacture, use,
sale, distribution or marketing of Products pursuant to this Agreement infringes
a Third Party patent, or the receipt of a cease and desist letter alleging
infringement by a Third Party, the Party sued or in receipt of the letter will
promptly notify the other Party in writing and shall provide copies of all
documents alleging such infringement. 

 

10.5.1.1      If the infringement claimed in the suit is an infringement claim
with respect to which one Party indemnifies the other Party pursuant to
Section15.2, and the Party providing the indemnification accepts its
indemnification obligation in a writing to the other Party, the Party affording
the indemnification shall have the right to defend the suit, as set forth in
Section 15.  In addition, whether or not such Party accepts its indemnification
obligation in writing, the Party that is ultimately determined to have had a
duty to indemnify the other pursuant to Section 15.2shall be responsible for the
costs of defending and settling such claim in accordance with Section 15.2, as
the case may be. 

 

10.5.1.2      If the claim of infringement is not a claim with respect to which
one Party indemnifies the other Party pursuant to Section 15.2, the Parties
shall cooperate and select mutually agreeable counsel to defend the claim on
behalf of both Parties; and each Party shall be responsible for fifty percent
(50%) of the costs of defense, and of any damages that may be finally awarded. 
If one Party pays more than fifty percent (50%) of any such defense costs or
damages at any time (such as, for example, if one Party but not the other pays
an invoice from defense counsel), the other Party shall reimburse the paying
Party a sufficient amount so that it shall have paid fifty percent (50%) of the
amount paid within thirty (30) days after receipt of an invoice therefor.  The
Parties will cooperate in the defense of the suit, and shall jointly instruct
defense counsel.  However, if the Parties cannot agree with respect to any
matter regarding such defense, Cepheid shall have the right to determine the
matter, and BioMeriéux may obtain counsel of its choosing, at its expense, to
defend its interests in the claim, and neither Party shall have any obligation
to reimburse the other for costs of defense incurred after the date counsel for
BioMeriéux enters its appearance. However, the Parties shall each remain
responsible for one half of any infringement damages awarded on account of the
manufacture or sale of Products pursuant to this Agreement, except with respect
to claims with

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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respect to which one Party indemnifies the other Party pursuant to Section 15.2,
as set forth below. 

 

10.5.1.3      Each Party will have the right but not the obligation to defend or
participate in the defense of any such allegation of infringement or suit, in
addition to the counsel representing both Parties, at its own expense.  Cepheid
and BioMeriéux will assist one another and cooperate in any such litigation at
the other’s reasonable request without expense to the requesting Party.  A Party
defending any such action alone will have full control over its conduct,
including settlement thereof; however, no settlement of an action will be made
without the prior written consent of the other Party if such settlement would
adversely affect the rights or obligations of the other Party, such consent not
to be unreasonably withheld or delayed.

 

10.5.2     Prosecution of Infringement Action.  In the event that Cepheid or
BioMeriéux becomes aware of actual or threatened infringement of a Patent Right,
comprising any Background Cepheid Intellectual Property, Background BioMeriéux
Intellectual Property, or Collaboration Cepheid, Collaboration BioMeriéux or
Collaboration Joint Intellectual Property, that Party shall promptly notify the
other Party in writing.  The owner of any such Patent Right shall have the first
right, but not the obligation, to bring, at its own expense, an infringement
action against any Third Party with respect to such Patent Rights.  If an owner
of the Patent Rights does not commence a particular infringement action within
ninety (90) days, the other Party, upon a showing of sufficient commercial
justification (as mutually agreed by the Parties, or as hereinafter defined),
after notifying the owner in writing, shall be entitled to bring the
infringement action at its own expense; provided, however, that in no event
shall Cepheid have any right to bring an infringement action against a Third
Party based, in whole or in part, on the Background BioMeriéux Intellectual
Property or Collaboration BioMeriéux Intellectual Property.  Sufficient
commercial justification for the bringing of such action by BioMeriéux shall
exist based on BioMeriéux’s showing of credible evidence of infringement and
that the Third Party has made combined sales on an annual basis in the United
States and the EU of at least US$10 million of a product that competes with the
Products sold by BioMeriéux, or has resulted in BioMeriéux’s loss of such amount
of sales of Products. The Party conducting the action shall have full control
over the action, including settlement thereof; provided, however, that no
settlement of an action shall be made without the prior written consent of the
other Party if such settlementwould adversely affect the rights or obligations
of the other Party, such consent not to be unreasonably withheld or delayed.  In
any event, each of Cepheid and BioMeriéux shall assist one another and cooperate
in any such litigation at the other’s reasonable request without expense to the
requesting Party, and, if a Party is necessary in order to institute or maintain
an infringement suit by the other Party as defined by law, that Party shall join
such suit, represented by its own counsel.

 

10.5.3     Expenses.  Cepheid and BioMeriéux have the right to first recover
their respective actual out-of-pocket expenses, or proportionate share thereof,
in connection with any litigation or settlement thereof relating to an action
prosecuted pursuant to Section 10.5.2 from any recovery made by any Party.  Any
remainder shall be shared by the Parties in proportion to the relative
percentage of total expenses incurred by each Party.

 

10.6        Information.  The Parties will keep one another reasonably informed
of the status of their respective activities regarding any such litigation or
settlement thereof

 

10.7        Development and Use of Trademarks.  BioMeriéux shall have the sole
right to determine the Trademarks (including any Licensed Trademarks) to be used
in connection

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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with the Products exploited by or on behalf of BioMeriéux on a worldwide basis. 
Neither BioMeriéux nor Cepheid shall, nor shall they permit their respective
Affiliates to use in their respective businesses, any Trademark (other than a
Licensed Trademark) used by BioMeriéux or Cepheid at any time to identify or
distinguish any Product, or any Trademark that is confusingly similar to,
misleading or deceptive with respect to, or that dilutes any such Trademark or
Licensed Trademark used to identify or distinguish the Products.All
representations of a Party’s Marks that the other Party intends to use will
first be submitted to such other Party for approval (which will not be
unreasonably withheld or delayed) of design, color and other details.  Each
Party hereby grants to the other Party a non-exclusive right and license to use
the marks, trade names (including the names “Cepheid” and “BioMeriéux”) and
logos (collectively, “Marks”) that the Parties by mutual agreement may employ
from time to time with respect to Products licensed and sold hereunder.  Except
as set forth in this Section 10.7, nothing contained in this Agreement will
grant to either Party any right, title or interest to the Marks of the other
Party.  Each Party hereby agrees to defend and indemnify the other Party and
hold it harmless against claims by a Third Party that the use by the other Party
of a Mark owned by a Party in a manner expressly authorized by such Party in
writing infringes intellectual property rights of such Third Party.

 

10.8          Patent Marking.  BioMeriéux shall comply with any Cepheid requests
that BioMeriéux mark any Products exploited by BioMeriéux under this Agreement,
or their containers, in accordance with all applicable patent-marking laws with
respect to any Cepheid Patent Rights and with such patent numbers provided by
Cepheid and updated as appropriate. Cepheid shall comply with any BioMeriéux
requests that Cepheid mark any Products to be sold to BioMeriéux under this
Agreement, or their containers, in accordance with all applicable patent-marking
laws with respect to any BioMeriéux Patent Rights and with such patent numbers
provided by BioMeriéux and updated as appropriate.

 

11.          TERM AND TERMINATION.

 

11.1        Term.  Unless terminated earlier as provided in this Section 11,
this Agreement will commence on the Effective Date and will remain in full force
and effect until the later of [***] related to the Products that have issued
before the Effective Date or will have issued after the Effective Date.

 

11.2        Termination. 

 

11.2.1     Mutual Agreement.  This Agreement may be terminated without cause by
mutual written agreement of the Parties, effective as of the time specified in
such written agreement; or 

 

11.2.2     Material Breach. This Agreement may be terminated by either Party
upon any material breach of this Agreement by the other Party; except that the
Party alleging such breach must first give the other Party written notice
thereof, which notice must state the nature of the breach in reasonable detail
and the other Party must have failed to cure such alleged breach within 60 days
after receipt of the notice; and the Party alleging the breach must terminate
this Agreement by written notice to the other Party given within 150 days of
first giving the other Party such written notice (except as may be tolled by any
arbitration proceeding instituted as to such breach).

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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11.2.3     Termination for Convenience by BioMeriéux.  BioMeriéux shall have the
right, in its sole discretion, to terminate this Agreement in its entirety or
with respect to one or more or all Products upon (i) ninety (90) days’ prior
written notice to Cepheid, if such notice is given prior to BioMeriéux’s
commercial launch of a GeneXpert Instrument or Cartridge; or (ii) 180 days prior
written notice, if such termination is given after such commercial launch.

 

11.2.4     Termination Upon Insolvency.  Either Party may terminate this
Agreement if, at any time, the other Party shall file in any court or agency
pursuant to any statute or regulation of any state, country or jurisdiction, a
petition in bankruptcy or insolvency or for reorganization or for an arrangement
or for the appointment of a receiver or trustee of that Party or of its assets,
or if the other Party proposes a written agreement of composition or extension
of its debts, or if the other Party shall be served with an involuntary petition
against it, filed in any insolvency proceeding, and such petition shall not be
dismissed within sixty (60) days after the filing thereof, or if the other Party
shall propose or be a party to any dissolution or liquidation, or if the other
Party shall make an assignment for the benefit of its creditors.

 

11.3        Consequences of Termination.

 

11.3.1     Return of Material; Effect on Licenses.

 

11.3.1.1      Upon termination of this Agreement pursuant to Section 11.1 (Term)
all Cepheid Patents will have expired and hence all patent licenses granted by
either Party to the other shall terminate.  Also, on termination under Section
11.1 (Term), Licenses from Cepheid to BioMeriéux under any other Cepheid
Intellectual Property shall continue.  Upon termination of this Agreement
pursuant to Section 11.2.2 (Termination for Material Breach) and Section 11.2.3
(Termination for Convenience by BioMeriéux), the licenses granted by each Party
to the other pursuant to Section 3.8 with respect to Collaboration Cepheid and
Collaboration Joint Intellectual Property shall remain in full force and effect.
Termination of this Agreement by Cepheid for failure of BioMeriéux to pay the
full $15 Million under Section 6.1, shall be treated as a Termination for
Material Breach by BioMeriéux.  In the event that prior to the effective date of
termination BioMeriéux has exercised the Instrument Option and made the
Instrument Option Payment in accordance with Section 9.2, and the payments
required in Sections 6.1, the licenses granted by Cepheid to BioMeriéux pursuant
to Section 3.3 shall remain in full force and effect for so long as BioMérieux
is not in a breach of the sublicense under the [***]  Patents (and has failed to
timely cure such breach) that would endanger Cepheid’s license from the [***] .
In the event that prior to the effective date of termination BioMeriéux has
exercised the Cartridge Option and made the Cartridge Option Payment in
accordance with Section 9.1.2 or 9.1.6, as applicable, and the payments required
in Section 6.1, the licenses granted by Cepheid to BioMeriéux pursuant to
Section 3.4 shall remain in full force and effect for so long as BioMeriéux is
not in default of payment of royalties due to Cepheid under Section 6.2.1 (and
has failed to timely cure such breach). The licenses granted to Cepheid pursuant
to Sections 3.5 (Development License) and 3.6 (Manufacturing License) shall
terminate except that the license granted under Section 3.5 shall remain in
effect, solely to the extent needed for Cepheid to permit Cepheid to make, use,
offer for sale, import and sell Cepheid NASBA Tests in accordance with any
agreements entered into with BioMeriéux for such tests in accordance with
Section 2.2.

 

11.3.1.2      In the event of any termination due to insolvency of a Party, all
rights and licenses granted under this Agreement by one Party to the other Party
are,

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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and will irrevocably be deemed to be, “intellectual property” as defined in
Section 101(35A) of the Bankruptcy Code.  In the event of the commencement of a
case by or against either Party under any Chapter of the Bankruptcy Code, this
Agreement will be deemed an executory contract and upon rejection of such
executory contract by a debtor Party, all rights and obligations of the
non-debtor Party hereunder will be determined in accordance with Section 365(n)
of the Bankruptcy Code.

 

11.3.1.3      Upon any termination of this Agreement, the Parties respective
rights to practice under the Collaboration Joint Patent Rights and Cepheid
Collaboration Patent Rights, as set forth in Sections, 10.1.4, 10.1.5.2 and
10.1.5.3 shall survive and remain in full force and effect. 

 

11.4        Upon termination of this Agreement for any reason, (i) each Party,
at the request of the other, shall return all data, files, records and other
materials in its possession or control relating to the other Party’s
Confidential Information (except one copy of which may be retained for archival
purposes), or (ii) certify in writing to the other Party that all such material
has been destroyed.

 

11.5        Survival of Obligations and Certain Rights.  Upon any termination of
this Agreement, by expiration of the term or otherwise, neither Party will be
relieved of any obligations incurred prior to such termination.  Despite any
termination or expiration of this Agreement, Sections 1 (Definitions), 3
(license Grants, subject to Section 11.3), 6.2 (Earned Royalties), 7 (Royalty
Reports and Accounting), 8.8 (Warranty), 8.14 (Records), 8.15.3 (Copies of
Records), 9 (Production Line Options), 10.1 (Ownership of Intellectual
Property), 10.2 (Filing of Patent Applications), 10.5 (Patent Litigation),  11.3
(Consequences of Termination), 11.5 (Survival of Obligations and Certain
Rights), 12 (Confidentiality), 13 (Representations, Warranties and Covenants;
Disclaimers), (14) Rights of Affiliates, 15(Indemnification), 16 (Limitation of
Liability), and 17 (General Provisions), as well as any other provisions that by
their nature are intended to survive any termination, will survive and continue
to be enforceable.  

 

12.          CONFIDENTIALITY.

 

12.1        Non-Disclosure; Non-Use.  The Parties agree, by using the same
degree of care as each uses for its own information of like importance, but not
less than a reasonable degree of care, to hold in confidence any Confidential
Information disclosed by the other Party hereunder, and not to disclose any
Confidential Information of the other Party to any Third Party or, except as
provided below, to any Affiliate, not to use any Confidential Information
disclosed by the other Party hereunder for any purpose other than carrying out
its obligations under this Agreement (including furthering the Joint Development
Program), without the express written consent of the other Party.  Each Party
will disclose Confidential Information only to its employees or agents who have
a need to know same for such purpose.  With respect to any Confidential
Information that is revealed by a Party to the other Party, the confidentiality
and non-use requirements of this Section 12 will remain in force for a period of
five (5) years following the date the Confidential Information is disclosed, or
three (3) years after the expiration or termination of this Agreement, whichever
is later.

 

12.2        Responsibility For Employees and Agents.  Each Party will assume
responsibility for the actions and omissions of its respective employees, agents
and assigns, and to inform them of the duties of confidentiality and non-use
under this Agreement, and to obtain their agreement to be bound in the same
manner that the Party is bound.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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12.3        Affiliates.  Nothing herein will be construed as preventing either
Party from disclosing any information to an Affiliate of BioMeriéux or Cepheid
for the purpose of furthering the Joint Development Program or exercising its
right or carrying out its obligations under this Agreement, provided such
Affiliate has undertaken a similar obligation of confidentiality and non-use
with respect to the Confidential Information.

 

12.4        Bankruptcy.  All Confidential Information disclosed by one Party to
the other will remain the property of the disclosing Party.  A Party subject to
a Bankruptcy Event will, to the extent permitted by law, take all steps
necessary or desirable to maintain the confidentiality of the other Party’s
Confidential Information and to ensure that any court or other tribunal maintain
such information in confidence in accordance with the terms of this Agreement.
In the event that a court or other legal or administrative tribunal, directly or
through an appointed master, trustee or receiver, assumes partial or complete
control over the assets of a Party based on the Bankruptcy Event of such Party,
the bankrupt or insolvent Party will promptly notify the court or other
tribunal, or such master, trustee or receiver, as appropriate, that (i)
Confidential Information of the other Party under this Agreement remains the
property of the other Party and (ii) Confidential Information of the other Party
has confidentiality and non-use obligations under this Agreement.

 

12.5        Publication.  Neither BioMeriéux nor Cepheid will submit for written
or oral publication any manuscript, abstract or the like that includes data or
other information generated and provided by the other Party or otherwise
developed by either Party under the Joint Development Program without first
obtaining the prior written consent of the other Party, which consent will not
be unreasonably withheld or delayed.  If written consent or written denial is
not provided by the other Party within 90 days, the first Party will have the
right to publish.  But, the foregoing will not apply to customary literature
that is prepared for marketing and sales purposes and that does not contain
Confidential Information of the non publishing Party.

 

12.6        Compliance with Statutory Requirements.  Subject to Section 12.7,
nothing in this Agreement will be construed as preventing or in any way
inhibiting either Party from complying with statutory or regulatory requirements
governing the development, manufacture, use, sale, or other distribution, of
Products in any manner that it reasonably deems appropriate, including, for
example, by disclosing to regulatory authorities Confidential Information or
other information received from a Party or Third Parties.  However, the
disclosing Party shall notify the other Party in advance of such disclosure and
take reasonable measures to assure that no unauthorized use or disclosure is
made by persons or entities to whom access to such information is granted under
this Section 12.6.

 

12.7        Terms of Agreement.  Neither Party shall disclose any terms or
conditions of this Agreement to any Third Party, other than non-confidential
details which refer to the existence and general type of Agreement and the field
of use restrictions stated herein,  without the prior consent of the other Party
which consent will not be unreasonably withheld or delayed; provided, however,
that a Party may disclose the terms or conditions of this Agreement, (i) on a
need-to-know basis to its legal and financial advisors to the extent such
disclosure is reasonably necessary, (ii) to a Third Party in connection with (a)
a merger, consolidation or similar transaction by such Party, or (b) the sale of
all or substantially all of the assets of such Party or (iii) as otherwise
required by law, provided that the disclosing Party shall (A) if practicable,
provide the other Party with reasonable advance notice of and an opportunity to

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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comment on any such required disclosure, (B) if requested by such other Party,
seek, or cooperate with such Party’s efforts to obtain, confidential treatment
or a protective order with respect to any such disclosure to the extent
available at such other Party’s expense, provided that, at BioMeriéux’s request,
Cepheid shall seek a confidential treatment request for any such disclosure
filed with the United States Securities and Exchange Commission at Cepheid’s
sole cost and expense, and (C) use good faith efforts to incorporate the
comments of such other Party in any such disclosure or request for confidential
treatment or protective order; provided further that such terms and conditions
shall be deemed Confidential Information and the Party making such disclosure
shall require that such Third Party receiving such Confidential Information
shall observe the same obligations of confidentiality as such Party owes under
this Agreement with respect to Confidential Information of the other Party. 
Notwithstanding the foregoing, any press releases describing the terms and
conditions of this transaction shall be mutually agreed by the Parties and each
Party may disclose such information as agreed in the press releases, as modified
by mutual written agreement of the Parties, without the consent of the other
Party.

 

12.8        Compelled Disclosure.  In the event that a Party (“Disclosing
Party”) is legally compelled (by deposition, interrogatory, request for
documents, subpoena, civil investigation demand or similar process) to disclose
any Confidential Information, the Disclosing Party will provide prompt prior
written notice of such compulsion to the other Party, so that the other Party
may seek a protective order or other appropriate remedy or, if appropriate,
waive compliance with the terms of this Agreement.  In the event that such
protective order or other remedy is not obtained, the Disclosing Party will
disclose only that portion of Confidential Information that it is advised by
opinion of counsel is legally required to be disclosed, or else stand liable for
contempt or suffer other censure or penalty, and will exercise its reasonable
best efforts to obtain reliable assurance that confidential treatment required
hereby will be accorded such Confidential Information; and the Disclosing Party
will not be liable for such disclosure unless such disclosure was caused by or
resulted from a previous disclosure by the Disclosing Party not permitted by
this Agreement.

 

13.          REPRESENTATIONS, WARRANTIES AND COVENANTS; DISCLAIMERS.

 

13.1        Representations and Warranties.  Each Party represents, warrants and
covenants to the other Party that:

 

13.1.1     The execution, delivery and performance of this Agreement and the
consummation by the Party of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of the Party, as appropriate.  

 

13.1.2     This Agreement when duly executed and delivered by the Party, will
constitute a valid and legally binding instrument of the Party enforceable in
accordance with its terms, except as enforcement hereof may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
or court decisions affecting enforcement of creditors’ rights generally and
except as enforcement hereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).

 

13.1.3     True, complete and correct copies of all agreements in which Cepheid
grants any right or license in or to any Cepheid Patents comprising any part of
the Cepheid Background Technology (the “Out-License Agreements”), as amended to
the date hereof, have been provided to BioMeriéux, and a list of such agreements
is set forth in

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Schedule 13.1.3.  The execution and delivery of this Agreement, the consummation
by the Party of the transactions herein contemplated and the compliance by the
Party with the terms hereof do not and will not violate the Articles of
Incorporation (as amended to date) of the Party or the By-Laws (as amended to
date) of the Party, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Party is a
party or by which the Party is bound or to which any of their properties or
assets are subject, or any applicable statute or any order, judgment, decree,
rule or regulation of any court or governmental or regulatory agency or body
having jurisdiction over the Party or any of their properties or assets, except
where such breach, violation, default or the failure to be in compliance would
not individually or in the aggregate have a Material Adverse Effect or adversely
affect the ability of the Party to perform the transactions contemplated hereby;
and no consent, approval, authorization, order, registration, filing or
qualification of or with any such court or governmental or regulatory agency or
body is required for the valid authorization, execution, delivery and
performance by the Party of this Agreement, or the performance by the Party of
the transactions contemplated by this Agreement; and

 

13.1.4     Neither such Party has been debarred or is subject to debarment, or
will use in any capacity, in connection with the services to be performed under
this Agreement, any person who has been debarred pursuant to Section 306 of the
Federal Food, Drug, and Cosmetic Act, or who is the subject of a conviction
described in such section.  Such Party agrees to inform the other Party in
writing immediately if it or any person who is performing services on its behalf
hereunder is debarred or is the subject of a conviction described in Section
306, or if any action, suit, claim, investigation or legal or administrative
proceeding is pending or, to the best of such Party’s knowledge, is threatened,
relating to the debarment or conviction of such Party or any person performing
services hereunder.

 

13.1.5     Neither Party shall enter into any agreement, the terms and
conditions of which, would be inconsistent with any of the terms and conditions
hereof.

 

13.2        Representations and Warranties of Cepheid.  Cepheid represents and
warrants to BioMeriéux that:

 

13.2.1     As of the Effective Date, and to Cepheid’s knowledge, Cepheid has
prepared, maintained and retained all regulatory documentation relating to
Instruments and Cartridges that is required to be maintained or reported by
Cepheid pursuant to applicable law.

 

13.2.2       Except as disclosed in writing to BioMeriéux prior to the Effective
Date, Cepheid is not aware of anything that could be reasonably expected to
materially adversely affect the acceptance, or the subsequent approval, by any
regulatory authority of any filing, application or request for regulatory
approval with respect to any Instrument or Cartridge.

 

13.2.3     Cepheid is the sole and exclusive owner of all right, title and
interest in and to the Patents listed on Schedule 13.2.3 (a) (the “Owned Cepheid
Patents”) and, except as provided in such Schedule, such rights are not subject
to any encumbrance, lien or claim of ownership by any Third Party related to the
NASBA Field of Use.  Cepheid is the licensee of and controls rights, title and
interest in and to the Patents listed on Schedule 13.2.3(b) (the “Licensed
Cepheid Patents”), in each case on either an exclusive or non-exclusive basis,
as

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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indicated in such schedule, and, except as disclosed by Cepheid to BioMeriéux in
writing prior to the Effective Date, such rights are not subject to any
encumbrance, lien or claim of ownership by any Third Party with respect to the
NASBA Field of Use. True, complete and correct copies of all license agreements
in which Cepheid receives any right or license to any Licensed Cepheid Patents
(the “In-License Agreements”), as amended to the date hereof, have been provided
to BioMeriéux, and a list of such agreements is set forth in Schedule13.2.3(c). 
The Owned Cepheid Patents and the Licensed Cepheid Patents constitute all of the
Patents that comprise any part of the Background Cepheid Intellectual Property
as of the Effective Date in the NASBA Field of Use. 

 

13.2.4     During the term of this Agreement, Cepheid shall not (i) commit any
act or permit the occurrence of any omission that would cause the breach or
termination of any In-License Agreement or (ii) amend or otherwise modify or
permit to be amended or modified any In-License Agreement if doing so would
encumber or diminish the rights granted to BioMeriéux hereunder with respect to
the Cepheid Patents.  Cepheid shall promptly provide BioMeriéux with notice of
any alleged, threatened, or actual breach of any In-License Agreement by any
party thereto that would adversely effect BioMeriéux’s rights under this
Agreement.  As of the date hereof, none of Cepheid and, to the best of their
knowledge, any Third Party is in breach of any In-License Agreement that would
adversely effect BioMeriéux’s rights under this Agreement.

 

13.2.5       The Cepheid Patents comprising any part of the Background Cepheid
Intellectual Property existing as of the Effective Date are subsisting and to
the knowledge of Cepheid, are not invalid or unenforceable. The conception,
development and reduction to practice by or on behalf of Cepheid of the
regulatory documentation relating to any Instrument or Cartridge existing as of
the Effective Date have not constituted or involved the misappropriation of
trade secrets or other rights or property of any Third Party.  Other than
payments owed by Cepheid pursuant to the In-License Agreements, there are no
claims, judgments or settlements against or amounts with respect thereto owed by
Cepheid or any of its Affiliates relating to Cepheid Patents or Know-how
comprising any part of the Background Cepheid Intellectual Property.  No claim
or litigation has been brought or threatened by any Third Party alleging, and
Cepheid is not aware of any claim, whether or not asserted, that (i) the Cepheid
Patents or Know-how comprising any part of the Background Cepheid Intellectual
Property are invalid or unenforceable, or (ii)  the Cepheid Patents or Know-how
comprising any part of the Background Cepheid Intellectual Property, or the use
thereof in accordance with the terms and conditions of this Agreement, infringes
any intellectual property or proprietary right of any Third Party.

 

13.2.6     Except as set forth in the Out-License Agreements, neither Cepheid
nor any of its Affiliates has (i) assigned, transferred, conveyed or otherwise
encumbered any right, title or interest in or to the regulatory documentation,
Cepheid Patents or Know-how comprising any part of the Background Cepheid
Intellectual Property, (ii) granted any license or other right, title or
interest in or to Cepheid Patents or Know-how in any manner, or (iii) agreed to
or is otherwise bound by any covenant not to sue for any infringement, misuse or
otherwise with respect to Cepheid Patents or Know-how, in each case that is
inconsistent with the grants, assignments and other rights reserved to
BioMeriéux and its Affiliates in this Agreement.

 

13.2.7       Subject to the terms and conditions of this Agreement, at no time
shall Cepheid or its Affiliates (i) assign, transfer, convey or otherwise
encumber any right, title or interest in or to the Background Cepheid
Intellectual Property, Collaboration Cepheid

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Intellectual Property, or Collaboration Joint Intellectual Property, or (ii)
agree to or otherwise become bound by any covenant not to sue for any
infringement, misuse or other action or inaction with respect to the Background
Cepheid Intellectual Property, Collaboration Cepheid Intellectual Property, or
Collaboration Joint Intellectual Property, in each case that is inconsistent
with the grants, assignments and other rights reserved to BioMeriéux and its
Affiliates under this Agreement.

 

13.2.8       To the best of Cepheid’s knowledge, there is no infringement by a
Third Party of Cepheid’s Intellectual Property Rights that would materially
interfere with the rights and licenses granted to BioMeriéux pursuant to this
Agreement

 

13.2.9     Each Party’s employees who will participate in the Development
Programs, or otherwise have access to the other Party’s Confidential
Information, shall have executed or, within five days after the Effective Date
or upon commencing employment with such Party, will execute agreements, whereby
all right, title and interest in any Intellectual Property Rights are assigned
to their respective employer.

 

13.3        Disclaimers.  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, NOTHING CONTAINED IN THIS AGREEMENT WILL BE CONSTRUED AS:

 

13.3.1     A WARRANTY OR REPRESENTATION BY EITHER PARTY AS TO THE VALIDITY,
ENFORCEABILITY, OR SCOPE OF ANY PATENT;

 

13.3.2     A WARRANTY OR REPRESENTATION THAT ANY MANUFACTURE, SALE, OFFER FOR
SALE, LEASE, IMPORT, USE OR OTHER DISPOSITION OF ANY PRODUCTS OR SERVICES
HEREUNDER WILL BE FREE FROM INFRINGEMENT OF PATENT, COPYRIGHT OR OTHER
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES;

 

13.3.3     A WARRANTY OR REPRESENTATION BY EITHER PARTY WITH RESPECT TO THEIR
ENFORCEMENT OF ANY PATENT INCLUDING THE PROSECUTION, DEFENSE OR CONDUCT OF ANY
ACTION OR SUIT CONCERNING INFRINGEMENT OF ANY SUCH PATENT;

 

13.3.4     CONFERRING ANY RIGHT TO USE IN ADVERTISING, PUBLICITY, OR OTHERWISE,
ANY TRADEMARK, TRADE NAME OR NAMES, OR ANY CONTRACTION, ABBREVIATION OR
SIMULATION THEREOF, OF EITHER PARTY;

 

13.3.5     AN OBLIGATION UPON EITHER PARTY TO MAKE ANY DETERMINATION AS TO THE
APPLICABILITY OF ANY OF ITS PATENTS TO ANY PRODUCT OR SERVICE;

 

13.3.6     AN INDUCEMENT BY ONE PARTY TO THE OTHER TO USE ANY PATENTS OR TO
MAKE, USE, OR SELL PRODUCTS COVERED BY ANY PATENTS, OR AN INDUCEMENT OF THE
OTHER PARTY’S CUSTOMERS TO PURCHASE OR OTHERWISE USE PRODUCTS COVERED BY ANY
PATENTS;

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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13.3.7     AN ADMISSION BY EITHER PARTY THAT ANY OF ITS PRODUCTS INFRINGE ANY
PATENTS OF THE OTHER PARTY; OR

 

13.3.8     A WARRANTY OR REPRESENTATION BY EITHER PARTY WITH RESPECT TO THE
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OF ANY PRODUCTS OR
SERVICES HEREUNDER.

 

14.          RIGHTS OF AFFILIATES

 

14.1        Rights and Obligations.  Any and all rights of BioMeriéux under this
Agreement may be extended by BioMeriéux to and for the benefit such of its
Affiliates as, and to the extent, BioMeriéux may from time to time designate,
but only for so long as such Affiliates remain Affiliates.  BioMeriéux shall
have the right to satisfy any or all of its obligations under this Agreement
through one or more of its Affiliates.

 

14.2        BioMeriéux Covenant.  BioMeriéux covenants and agrees that it will
be responsible for compliance with the terms and conditions of this Agreement
and any liability arising therefrom, by any Affiliate designated under Section
14.1.

 

15.          INDEMNIFICATION.

 

15.1        General Indemnity.  Each Party (the “Indemnitor”) will defend,
indemnify and hold harmless the other Party, its Affiliates, and any of its or
their officers, directors, employees or agents (the “Indemnitees”) against any
and all claims made by, or judgment, damage, liability, loss, cost or other
expense, including reasonable legal fees and expenses (collectively,
“Liability”), resulting from any claims made by or proceedings brought by, any
Third Party to the extent that the claim or Liability arises from the following:

 

15.1.1     The Indemnitor’s negligence or willful misconduct in connection with,
relating to, or arising out of, this Agreement, including Cepheid’s manufacture
and supply of Products, or BioMeriéux’s manufacture and sale of Products to the
extent that BioMeriéux has exercised either or both of its manufacturing options
as set forth in this Agreement, or any recall under Section 8.8.3; or

 

15.1.2     The Indemnitor’s material breach of this Agreement, including any
warranty set forth in Sections 8.8 and 13.

 

15.1.3     Notwithstanding the foregoing, the indemnification obligations of a
Party pursuant to this Section 15.1 shall not apply to the extent of any
Liability for which the other Party has an obligation hereunder to indemnify
such first Party, as to which Liability each party shall indemnify the other to
the extent of their respective Liability.

 

15.2        Intellectual Property Indemnity. The Indemnitor will defend or
settle any and all claims or Liability resulting from any claims made by or
proceedings brought by, any Third Party against the Indemnitees to the extent
that the claim or Liability arises from a claim that the use of the Background
Cepheid Intellectual Property (if Cepheid is the Indemnitor) or the use of the
Background BioMeriéux Intellectual Property (if BioMeriéux is the Indemnitor)
infringes a Third Party’s Intellectual Property Rights, and the Indemnitor will
pay any Liability attributable to such claim that is awarded against the
Indemnitees in a final judgment resulting from any such claim or settlement
entered into with respect thereto. Notwithstanding the

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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foregoing, this Agreement does not obligate BioMeriéux to indemnify Cepheid for
Cepheid’s sales of products outside of the NASBA Field of Use.

 

15.3        Notice; Choice of Attorney.  If the Indemnitee intends to claim
indemnification under this Section 15, the Indemnitees will promptly notify the
Indemnitor of any claims or Liability in respect of which the Indemnitee intends
to claim indemnification.  The Indemnitor, after it determines that
indemnification is required of it, will assume the defense and settlement
thereof with counsel of its choice, reasonably acceptable to Indemnitee.  An
Indemnitee will have the right to retain its own counsel, with the reasonable
fees and expenses to be paid by the Indemnitor only if Indemnitor does not
assume the defense or if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other Party represented by
counsel. 

 

15.4        Consent Required.  The indemnity provisions in this Section 15 will
not apply to amounts paid in settlement of any claim or Liability if the
settlement is effected without the consent of the Indemnitor, not to be
unreasonably withheld. In addition, neither Party shall enter into any
settlement or otherwise resolve any infringement matter in a manner that would
adversely impact the business of the other Party or in any manner limit the
other Party’s rights or obligations without such Party’s prior written consent,
which will not be unreasonably withheld.

 

15.5        Cooperation.  The Indemnitees under this Section 15, (and shall
cause their respective its employees and agents to), cooperate fully with the
Indemnitor and its legal representatives in the investigations of any action,
claim or Liability covered by this indemnification.  In the event that each
Party claims indemnity from the other and one Party is finally held liable to
indemnify the other, the Indemnitor will additionally be liable to pay the
reasonable legal costs and attorneys’ fees incurred by the Indemnitees in
establishing its claim for indemnity.

 

15.6        Insurance.  Each Party shall have and maintain such type and amounts
of liability insurance covering the manufacture, supply, use and sale of the
Instruments and Cartridges as is normal and customary in the diagnostics
industry generally for parties similarly situated, and shall upon request
provide the other Party with a certificate of insurance evidencing such
insurance coverage.

 

16.          LIMITATION OF LIABILITY.

 

EXCEPT AS SET FORTH IN SECTION 16, NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL CEPHEID OR BIOMERIÉUX BE LIABLE TO
THE OTHER, WHETHER IN CONTRACT, TORT, WARRANTY, OR UNDER ANY STATUTE (INCLUDING
ANY TRADE PRACTICE, UNFAIR COMPETITION OR OTHER STATUTE OF SIMILAR IMPORT) OR ON
ANY OTHER BASIS, FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, DAMAGES OF
THE OTHER, OR FOR MULTIPLE OR PUNITIVE DAMAGES, WHETHER OR NOT FORESEEABLE AND
WHETHER OR NOT THE OTHER IS ADVISED OF THE POSSIBILITY OF DAMAGES, INCLUDING ANY
SUCH DAMAGES ARISING FROM OR RELATED TO LOSS OF USE, LOSS OF DATA, FAILURE OR
INTERRUPTION IN THE OPERATION OF ANY PRODUCTS, DELAY IN REPAIR OR REPLACEMENT,
OR LOSS OF OPPORTUNITY OR GOODWILL.  THE PARTIES AGREE THAT THE DAMAGES
INDEMNIFIED UNDER SECTIONS 15.1 AND 15.2 SHALL BE DEEMED NOT TO BE

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, OR MULTIPLE OR PUNITIVE
DAMAGES, AND SHALL NOT FALL WITHIN THE DISCLAIMER PROVIDED IN THIS SECTION 16.

 

17.          GENERAL PROVISIONS.

 

17.1        Books and Record; Audit-General. Books, records and accounts which
are required to be kept by a Party under this Agreement shall, unless otherwise
provided herein, be retained until the later of (A) three (3) years after the
end of the period to which such books, records and accounts pertain, and (B) the
expiration of the applicable tax statute of limitations (or any extensions
thereof), or for such longer period as may be required by applicable law.  With
respect to financial matters, such records will include, without limitation,
general ledger records of receipts and disbursements sufficient to verify the
matter being reviewed.  Each Party will have the right from time to time (not to
exceed once per calendar year) during normal business hours and upon five (5)
business days prior written notice, to inspect in confidence, or in the case of
financial records have an independent public accounting firm that is reasonably
acceptable to the other Party, audit in confidence, such books, records and
accounts of the other Party. Such audit shall not unreasonably interfere with
the audited Party’s normal business operations. The Party initiating the audit
will bear the costs thereof unless the audit reveals a discrepancy unfavorable
to that Party of at least five percent (5%), in which case the other Party will
pay the costs of the audit.  If the audit results in a final determination that
amounts have been overstated or understated, the applicable amount will be
refunded or paid promptly by the appropriate Party. The auditing Party will
treat all information learned in the course of any audit as Confidential
Information, and will maintain such Confidential Information in strict
confidence, except to the extent necessary for the Party to reveal such
information in order to enforce its rights under this Agreement or if disclosure
is required by law.  Any public accounting firm shall sign a customary
confidentiality agreement as a condition precedent to their audit, and shall
report to the auditing Party only its findings and conclusion with respect to
accuracy of financial records, calculations and reports of the other Party, and
any particular in which the audited Party has not complied with its applicable
obligations.

 

17.2        Publicity.  Subject to Section 12.7, BioMeriéux and Cepheid shall
consult with each other before issuing, and provide each other an opportunity to
review, comment upon and concur with, and use all reasonable efforts to agree
on, any press releases or public statements with respect to the transactions
contemplated hereby.

 

17.3        Binding Agreement; No Third Party Beneficiaries; Assignment.  This
Agreement shall be binding upon, and shall inure solely to the benefit of, each
of the Parties hereto, and each of their respective heirs, executors,
administrators, successors and permitted assigns.  Neither BioMeriéux nor
Cepheid may assign any of its rights or obligations hereunder to any other
person or entity without the prior written consent of the other Party hereto;
provided, however, that BioMeriéux may, without such consent, assign this
Agreement and its rights and obligations hereunder to an Affiliate so long as
BioMeriéux remains fully responsible for the performance of all of the
obligations set forth in this Agreement. In addition, either Party may assign
this Agreement and its rights and obligations hereunder to the purchaser of all
or substantially all of its assets related to the Instrument(s) and Cartridges,
or to its successor entity

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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or acquirer in the event of a merger, consolidation or Change in Control of such
Party.  Any attempted assignment or delegation in violation of the preceding
sentence shall be void and of no effect.  All validly assigned and delegated
rights and obligations of the Parties hereunder shall be binding upon and inure
to the benefit of and be enforceable by and against the successors and permitted
assigns of BioMeriéux or Cepheid, as the case may be.  In the event either Party
seeks and obtains the other Party’s consent to assign or delegate its rights or
obligations to another party, the assignee or transferee shall assume all
obligations of its assignor or transferor under this Agreement.

 

17.4        Entire Agreement.  This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, written and oral, between the Parties with
respect to the subject matter hereof, including that certain Confidentiality
Agreement dated February 6, 2003.  Upon execution by Cepheid and BioMeriéux,
this Agreement shall be binding on both Parties. Notwithstanding any of the
foregoing, this Agreement shall not supercede the Option Agreement entered into
by the Parties, whereby BioMeriéux was granted an option to enter into this
Agreement with Cepheid.

 

17.5        Governing Law; Consent To Jurisdiction; Waiver of Jury Trial.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to its conflicts of laws principles. 
Each of the Parties hereby irrevocably submits to the jurisdiction of the courts
of the State of New York and the United States of America for the District of
Northern California in any legal proceeding arising out of or relating to this
agreement.  EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

 

17.6        Dispute Resolution.

 

17.6.1     The Parties recognize that a bona fide dispute as to certain matters
may from time to time arise during the term of this Agreement which relates to
either party’s or its Affiliates’ rights and/or obligations hereunder, such as,
for example, a dispute as to whether a particular product properly falls within
the license.  In the event of the occurrence of such a dispute, either party
may, by notice to the other party, have such dispute referred to their
respective designees, listed below, or their successors, for attempted
resolution by good faith negotiations within sixty (60) days after such notice
received.  Said designees are as follows:

 

For Cepheid:                         Chief Executive Officer

 

For BioMeriéux:                                    Chief Executive Officer of US
operations.

 

In the event the designees are not able to resolve such dispute within such
sixty (60) day period, or any agreed extension thereof, either Party may invoke
the provisions for binding Alternative Dispute Resolution (ADR) set forth in
Appendix II attached thereto.

 

17.6.2     Interim Relief.  Notwithstanding anything herein to the contrary,
nothing in this Section 17.6 shall preclude either Party from seeking interim or
provisional relief, including a temporary restraining order, preliminary
injunction or other interim

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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equitable relief concerning a dispute, either prior to or during any alternative
dispute resolutions process hereunder, if necessary to protect the interests of
such Party. This Section 17.6.2 shall be specifically enforceable.

 

17.7        Notices.  All notices, requests, consents and other communications
hereunder shall be in writing, shall be deemed duly given (i) on the date of
delivery if delivered personally, (ii) on the date of confirmation of receipt
(or the first business day following such receipt if the date is not a business
day) of transmission by facsimile, or (iii) on the date of confirmation of
receipt (or the first business day following such receipt if the date is not a
business day) if delivered by a nationally recognized courier service, and shall
be delivered as addressed as follows (or to such other address as may designated
in writing by the addressee):

 

if to Cepheid, to:

 

[Cepheid]
904 Caribbean Drive
Sunnyvale, California  94089

Attn:       General Counsel

Facsimile: 408-400-4193

 

with a copy mailed to:

 

Douglas N. Cogen
Fenwick & West LLP
Embarcadero Center West
275 Battery Street
San Francisco, California  94111

Facsimile:  415-281-1350

 

if to BioMeriéux, to:

 

[BioMeriéux]

100 Rodolphe Street

Durham, NC, 27712

Attn:       President

Facsimile: 919-620-2519

with a copy mailed to:

 

General Counsel (Same address and fax).

 

17.8        Force Majeure.  Except as may be herein otherwise specifically
provided, neither Party shall be liable to the other for loss, injury, delay,
expenses, damages, or other casualty suffered or incurred by the other Party due
to a delay in performing or the failure to perform obligations hereunder as
result of trade disputes, strikes, riots, storms, earthquakes, fires, acts of
God or government or any cause (whether similar or dissimilar to the foregoing),
including but not limited to any shortages of power that is not caused by the
fault or inaction of the Party seeking to be excused from performance, beyond
the reasonable control of the Party seeking to be excused from performance,
provided, however, that such Party shall have given the

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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other Party prompt notice in writing of the occurrence of any such events or
causes, and of their discontinuance, and diligently seeks to perform at the
earliest reasonable opportunity; and further provided that this Section 17.8
shall not apply to any obligation to pay money hereunder.  If requested by
either Party, the Parties will discuss what, if any, modification of the terms
of this Agreement may be required in order to arrive at an equitable solution
should performance be materially delayed or prevented by events of force majeure
as set forth in this Section 17.8, but neither Party shall have an obligation to
amend this Agreement.  In the event the suspension of performance continues for
one-hundred and eighty (180) days after the date of the occurrence, and such
failure to perform would constitute a material breach of this Agreement in the
absence of such force majeure, the performing Party may terminate this Agreement
pursuant to Section 11.2.2 by written notice to the other Party.

 

17.9        Export Control Regulations.  The rights and obligations of the
Parties under this Agreement shall be subject in all respects to United States
laws and regulations as shall from time to time govern the license and delivery
of technology and products abroad, including the United States Foreign Assets
Control Regulations, Transaction Control Regulations and Export Control
Regulations, as amended, and any successor legislation issued by the Department
of Commerce, International Trade Administration, or Office of Export Licensing. 
Without in any way limiting the provisions of this Agreement, each Party agrees
that, unless prior authorization is obtained from the Office of Export
Licensing, it will not export, re-export, or transship, directly or indirectly,
to any country, any of the technical data disclosed to it by the other Party
hereto if such export would violate the laws of the United States or the
regulations of any department or agency of the United States Government

 

17.10      Counterparts; Headings.  This Agreement may be executed in multiple
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one in the same agreement.  The
headings in this Agreement are for convenience and shall not affect the
interpretation hereof.  A reference in this Agreement to an section, appendix,
schedule or exhibit shall be to an article, section or exhibit of this
Agreement, unless otherwise indicated.

 

17.11      Amendments and Waivers.  Any term of this Agreement may be amended
only by a writing executed by each of Cepheid and BioMeriéux.  No waiver of any
term or condition of this Agreement be valid or binding on any Party unless the
same shall have been mutually assented to in writing by each Party.  The failure
of a Party to enforce at any time any of the provisions of this Agreement, or
the failure to require at any time performance by one or both of the other
Parties of any of the provisions of this Agreement, shall in no way be construed
to be a present or future waiver of such provisions, nor in any way affect the
ability of a Party to enforce each and every such provision thereafter.

 

17.12      Specific Performance.  The Parties agree that irreparable damage
would occur in the event that certain provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise materially
breached.  It is accordingly agreed that the Parties shall be entitled to seek
an injunction to prevent a material breach of this Agreement and to enforce
specifically the terms and provisions hereof, to the extent any such breach
would adversely affect one or more material rights granted to a Party
hereunder.  The rights and remedies provided in this Section 17.12 shall be
cumulative and in addition to any other rights and remedies to which they are
entitled at law or in equity.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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17.13      Severability.  If any provision in this Agreement shall be found or
be held to be invalid or unenforceable then the meaning of said provision shall
be construed, to the extent feasible, so as to render the provision enforceable,
and if no feasible interpretation would save such provision, it shall be severed
from the remainder of this Agreement which shall remain in full force and
effect.

 

17.14      Construction.

 

17.14.1                  No Construction Against Drafter.  The Parties
acknowledge that they have been represented by counsel in the negotiation and
execution of this Agreement, and therefore waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement will be construed against the Party drafting such agreement.

 

17.14.2  Certain Words and Terms. Unless the context clearly requires otherwise,

 

(i)            the plural and singular numbers will each be deemed to include
the other;

 

(ii)           “will,” “shall,” “will agree,” “shall agree,” or “agrees” are
mandatory, and “may” is permissive;

 

(iii)          “or” is not exclusive; and

 

(iv)          “includes” and “including” are not limiting.

 

17.15      Relationship of the Parties.  Nothing contained in this Agreement
will be construed to make the Parties partners, joint venturers, principals,
agents or employees of the other.  Neither Party will have the right, power, or
authority, express or implied, to bind the other Party.

 

[remainder of this page intentionally left blank]

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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IN WITNESS WHEREOF, the Parties have executed this License Agreement as of the
date first above written.

 

 

CEPHEID

 

 

 

 

 

By:

 

 

 

 

Name:

John L. Bishop

 

 

Title:

CEO

 

 

 

 

 

BIOMERIÉUX, INC.

 

 

 

 

 

By:

 

 

 

 

Name:

Philippe Sans

 

 

Title:

President & CEO

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Appendix 1

 

[***] Patents

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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Appendix II

 

ALTERNATIVE DISPUTE RESOLUTION

 

Capitalized terms used herein shall have the meaning ascribed in the Agreement,
unless otherwise defined herein.

 

Subject to Section 17.6.2 of the Agreement, in the event of any dispute,
difference or question arising between the Parties in connection with the
Agreement, the construction thereof, or the rights, duties or liabilities of
either Party excluding any dispute or controversy for which arbitration is
prohibited by any applicable law or treaty, and which dispute is not amicably
resolved by the good faith efforts of the Parties under Section17.6 of the
Agreement, then, if either Party so requests, such dispute shall be resolved by
binding Alternative Dispute Resolution (“ADR”) in the manner described below:

 

(a)           If any Party intends to begin an ADR to resolve a dispute, such
Party shall provide written notice to counsel for the other Party informing the
other Party of such intention and the issues to be resolved.  Within ten (10)
business days after the receipt of such notice, the other Party may by written
notice to the counsel for the Party initiating ADR, add additional issues to be
resolved.  From the date of the ADR notice and until such time as any matter has
been finally settled by ADR, the running of the time periods in which a Party
must cure a breach of this Agreement shall be suspended as to the subject matter
of the dispute.

 

(b)           Within five (5) business days following the receipt of the
original ADR notice (“Notice Date”) a neutral shall be selected by the then
President of the Center for Public Resources (“CPR”), 14th floor, 366 Madison
Avenue, New York, New York 10017.  The neutral shall be an individual who shall
preside in resolution of any disputes between the Parties.  The neutral selected
shall be a member of the Judicial Panel of the CPR and shall not be an employee,
director or shareholder of either a Party or of an Affiliate of either Party.

 

(c)           Each Party shall have ten (10) business days from the date the
neutral is selected to object in good faith to the selection of that person.  If
either Party makes such and objection, the then president of the CPR shall as
soon as possible thereafter, select another neutral under the same conditions
set forth above.  This second selection shall be final.

 

(d)           No later than ninety (90) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the
Parties.

 

(i)            Each Party shall have the right to be represented by counsel at
the hearing.

(ii)           The hearing shall be held in the continental United States at
such place as agreed upon by the Parties or if they are unable to agree at a
place designated by the neutral.

 

(e)           The ADR proceeding shall be confidential and the neutral shall
issue appropriate protective orders to safeguard each Parties’ Confidential
Information.  Except as required by law, no Party shall make (or instruct the
neutral to make) any public announcement with respect to the proceedings or
decision of the neutral without the prior written consent of each other Party. 
The existence of any dispute submitted to ADR, and the award of the neutral,
shall be kept in confidence by the Parties and the neutral, except as required
in connection with the enforcement of such award or as otherwise required by
applicable law.

 

(f)            It is the intention of the Parties that discovery, although
permitted as described herein, will be extremely limited except in exceptional
circumstances.  The neutral shall permit such limited discovery necessary for an
understanding of any legitimate issue raised in the ADR, including the
production of documents.  Each Party shall be permitted but not required to take
the deposition of not more than five (5) persons, each such deposition not to
exceed six (6) hours in length.  If the neutral believes that exceptional
circumstances exist, and additional discovery is necessary for a full and fair
resolution of the issue, the neutral may order such additional discovery as the
neutral deems necessary.  At the hearing the Parties may present testimony
(either by live witness or deposition) and documentary evidence.  The neutral
shall have

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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sole discretion with regard to the admissibility of any evidence and all other
materials relating to the conduct of the hearing.

 

(g)           Each Party shall be entitled to no more than four (4) hours of
hearing to present testimony or documentary evidence.  The testimony of both
Parties shall be presented during the same calendar day.  Such time limitation
shall include any direct, cross or rebuttal testimony, but such time limitation
shall only be charged against the Party conducting such direct, cross or
rebuttal testimony.  It shall be the responsibility of the neutral to determine
whether the Parties have had the four (4) hours to which they are entitled.  If
the neutral believes that exceptional circumstances exist, and additional
hearing time is necessary for a full and fair resolution of the issue, the
neutral may order such additional hearing time as the neutral deems necessary.

 

(h)           At least fifteen (15) business days prior to the date set for the
hearing, each Party shall submit to each other Party and the neutral a list of
all documents on which such Party intends to rely in any oral or written
presentation to the neutral and a list of all witnesses, if any, such Party
intends to call at such hearing and a brief summary of each witnesses testimony.

 

(i)            At least five (5) business days prior to the hearing, each Party
must submit to the neutral and serve on each other Party a proposed ruling on
each issue to be resolved.  Such writing shall be limited to presenting the
proposed ruling, shall contain no argument or analysis of the facts or issues,
and shall be limited to not more than ten (10) pages.

 

(j)            Not more than five (5) business days following the close of
hearings, the Parties may each submit post hearing briefs to the neutral
addressing the evidence and issues to be resolved. Such post hearing briefs
shall not be more than fifty (50) pages.

 

(k)           The neutral shall rule on each disputed issue after the hearing as
expeditiously as possible, but in no event more than thirty (30) days after the
close of the hearings.  The neutral shall, in rendering his decision, apply the
substantive law of the state of New York, U.S.A., and without giving effect to
its principles of conflicts of law, and without giving effect to any rules or
laws relating to arbitration.  The neutral is not empowered with the remedy of
termination of the license(s) granted by the accompanying Agreement.

 

(l)            Any judgment upon the award rendered by the neutral may be
entered in any court having jurisdiction thereof.  The decision rendered in any
such ADR shall be final and not appealable, except in cases of fraud or bad
faith on the part of the neutral or any Party to the ADR proceeding in
connection with the conduct of such proceedings, and shall be enforceable in any
court of competent jurisdiction.

 

(m)          The neutral shall have the option to assess costs and expenses to
the non-prevailing Party, otherwise the Parties shall pay their own costs
(including, without limitation, attorneys fees) and expenses in connection with
such ADR.

 

The symbol [***] is used to indicate that a portion of the exhibit has been
omitted and filed separately with the commission.  Confidential treatment has
been requested with respect to the omitted portion.

 

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