Exhibit 10.31

 

AGREEMENT

 

                This Settlement and Release Agreement is made and entered into
as of the date of the last PARTY to sign the Agreement below (the “Effective
Date”), by and between Affymetrix, Inc., a corporation organized under the laws
of the State of Delaware having a principal place of business at 3380 Central
Expressway, Santa Clara, CA 95051, (“AFFYMETRIX”) on behalf of itself and its
AFFILIATES, their successors and assigns, and Illumina, Inc., a corporation
organized under the laws of the State of Delaware having a principal place of
business at 9885 Towne Center Drive, San Diego, California, 92121 (“ILLUMINA”)
on behalf of itself and its AFFILIATES, their successors and assigns.  The
signatories to this Agreement are sometimes referred to herein jointly as the
“PARTIES” and individually as a “PARTY”.

 

                WHEREAS, AFFYMETRIX has filed the ACTIONS in the United States
District Court for the District of Delaware, in Regional Court of Düsseldorf
(Germany), and in the High Court of Justice, Chancery Division – Patents Court
in London (United Kingdom);

 

                WHEREAS, to avoid the necessity, expense, inconvenience and
uncertainty of additional or continued litigation, the PARTIES wish to settle
the disputes between them in the ACTIONS and to resolve and preclude certain
related and other claims as provided herein; and

 

                WHEREAS, AFFYMETRIX and ILLUMINA wish to avoid the uncertainties
and costs associated with pursuing the ACTIONS and any controversy or litigation
relating to thereto, and they mutually desire to resolve their differences
concerning the Actions and all claims and causes of action set forth in or
contemplated thereby on the following terms and conditions.

 

                NOW, THEREFORE, for good and valuable consideration, including,
without limitation, the releases and mutual promises contained herein, the
receipt of which is hereby acknowledged, the Parties agree as follows:

 

 

I.              DEFINITIONS

 

1.1           “ACTIONS” means individually and collectively,

 

(i) Affymetrix, Inc. v. Illumina, Inc., United States District Court for the
District of Delaware, Civil Action No. 04-901-JJF filed July 26, 2004;

 

(ii) Affymetrix, Inc. v. Illumina, Inc., United States District Court for the
District of Delaware Civil Action No. 07-670-JJF filed October 24, 2007;

 

(iii) Affymetrix, Inc. v. Illumina GmbH and Illumina, Inc., in Regional Court in
Düsseldorf (Germany) filed October 24, 2007; and

 

 

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(iv) Affymetrix, Inc. v. Illumina UK Ltd. and Illumina, Inc., in the High Court
of Justice, Chancery Division – Patents Court in London (United Kingdom) filed
October 24, 2007.

 

1.2           “AFFILIATE” means any entity that is, directly or indirectly,
controlling, controlled by or under common control with either PARTY, but only
so long as such Control exists.  As used in this Section 1.2, “Control” of an
entity means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such entity, whether
through the ownership of voting securities (or other ownership interest), by
contract or otherwise.

 

1.3           “BLOCKING PATENTS” means all patents and applications therefor,
anywhere in the world, currently as of the Effective Date or at any time
thereafter, owned by AFFYMETRIX (or by an AFFYMETRIX AFFILIATE) or under which
AFFYMETRIX (or an AFFYMETRIX AFFILIATE) has the right to grant licenses or
sublicenses, having a claim that covers a CURRENT PRODUCT.

 

1.4           “CHANGE OF CONTROL” means any transaction or series of related
transactions with respect to any PARTY, including any such transaction(s) in
bankruptcy, in which, a person or group of related persons who do not Control
such PARTY prior to such transaction or series of transactions, subsequently
obtain(s) Control of such PARTY by any means, whether by operation of law,
acquisition of securities, merger, contract, acquisition of assets, or
otherwise.  As used in this Section 1.4, “Control” of an entity means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities (or other ownership interest), by contract or
otherwise.

 

1.5           “CURRENT PRODUCTS” means (i) any products of ILLUMINA’s (or an
ILLUMINA AFFILIATE’s) product line commercialized by ILLUMINA or by an ILLUMINA
AFFILIATE as of the Effective Date, (ii) any products resulting from ILLUMINA’s
(or from an ILLUMINA AFFILIATE’s) research and development efforts, as of the
Effective Date, publicly announced or documented in ILLUMINA’s (or in an
ILLUMINA AFFILIATE’s) formal product development process, and (iii) all
EVOLUTIONARY IMPROVEMENTS to products of categories (i) and (ii).

 

1.6           “EVOLUTIONARY IMPROVEMENTS” means modifications, revisions,
additions, enhancements, changes or similar alterations to an original product,
to enhance the original product in terms of its performance and/or
functionality, and in which the original product retains its essential character
or remains identifiable.

 

                1.6.1   For the avoidance of doubt, EVOLUTIONARY IMPROVEMENTS do
not include revolutionary advances, i.e., advances that are different as a
matter of kind in comparison to the original product, or that fundamentally
change or alter the methodology by which the original product functions.

 

 

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1.7           “ILLUMINA FIELD” means any technology that is not based on
photolithography.  For clarity, what is carved out of the ILLUMINA FIELD
includes (i) arrays made using photolithography, and (ii) technologies involving
instruments, assays, reagents, software, and other products, methods, or
systems, in each and every case capable of being used only with arrays made
using photolithography.  By way of example, but not by way of limitation, the
technology disclosed in software patent No. 5,795,716 asserted against ILLUMINA
in the ACTIONS is within the ILLUMINA FIELD.

 

 

II.            GRANTS

 

2.1           AFFYMETRIX, on its behalf and on behalf of its AFFILIATES, hereby
grants and agrees to grant to ILLUMINA and its AFFILIATES, a fully paid-up,
irrevocable, worldwide, covenant not to sue ILLUMINA, its AFFILIATES, and their
customers, under and for the lives of the BLOCKING PATENTS, to allow ILLUMINA
and its AFFILIATES to make, use and sell (which includes, without limitation,
the right to have made, offer for sale, export, import, lease, install, service,
test, repair, upgrade and otherwise maintain, provide services using) CURRENT
PRODUCTS, and to provide services using CURRENT PRODUCTS.  For the avoidance of
doubt, the covenant not to sue granted by AFFYMETRIX under this Section 2.1 is
only granted in the ILLUMINA FIELD.

 

2.2           For all products other than CURRENT PRODUCTS, and for all services
commercialized by ILLUMINA and its AFFILIATES using products other than CURRENT
PRODUCTS, AFFYMETRIX, on its behalf and on behalf of its AFFILIATES, hereby
grants and agrees to grant to ILLUMINA and its AFFILIATES an irrevocable,
worldwide, covenant not to sue ILLUMINA, its AFFILIATES, and their customers,
but only for a period of four (4) years from the Effective Date, under the
BLOCKING PATENTS and under any other patents owned by AFFYMETRIX or its
AFFILIATES, or regarding which AFFYMETRIX or its AFFILIATES has the right to
grant licenses or sublicenses.  The PARTIES hereby acknowledge and agree that
during such four (4)-year period no damages shall accrue as a result of
ILLUMINA’s commercialization of such products and services.  The PARTIES further
acknowledge and agree that the covenant not to sue granted by AFFYMETRIX under
this Section 2.2 is only granted in the ILLUMINA FIELD.

 

2.3           ILLUMINA, on its behalf and on behalf of its AFFILIATES, agrees,
at the request of AFFYMETRIX during the term of the covenant of Section 2.2, to
engage in good faith negotiations with AFFYMETRIX to provide a license on usual
and reasonable commercial terms to AFFYMETRIX and its AFFILIATES with respect to
any patent or patent application owned by ILLUMINA or any of its AFFILIATES or
under which ILLUMINA or any of its AFFILIATES has the right to grant licenses or
sublicenses, in any application area but only (i) for arrays made using
photolithography and/or (ii) for technologies involving instruments, assays,
reagents, software, and other products,

 

 

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methods, or systems, in each and every case capable of being used only with
arrays made using photolithography.

 

2.4           All covenants of this Article II shall become effective only upon
receipt by AFFYMETRIX of the payment specified in Section 4.1 hereof and of the
required executed sets of the Agreement.

 

2.5           Nothing in this Agreement shall limit or in any way affect the
rights of either PARTY to engage in any administrative or judicial proceeding to
challenge, invalidate, narrow, condition, or otherwise affect the term or scope
of any patent or patent application of the other PARTY or its AFFILIATES, or
otherwise affect the course of prosecution, maintenance, or enforcement of any
patent or patent application of the other PARTY or its AFFILIATES, including but
not limited to such actions as participating, directly or indirectly, in
oppositions, interferences, reexaminations, or similar proceeding anywhere in
the World.  It is expressly understood and agreed, however, that the payment
obligations specified in Section 4.1 are irrevocable, and such payments are to
be made by ILLUMINA in accordance with the provisions of Section 4.1 and without
regard to the outcome of any proceeding referred to in this Section 2.5 or any
other event or condition whatsoever.

 

 

III.           RELEASES, DISMISSALS AND WAIVERS

 

3.1           AFFYMETRIX, for itself, its AFFILIATES, their successors and
assigns, hereby irrevocably and unconditionally (except for the payment
obligations set forth in Section 4.1 hereof) releases, acquits and forever
discharges ILLUMINA and its AFFILIATES, together with their past and present
directors, officers, employees, successors and assigns, and customers (the
“ILLUMINA Released Parties”), in each and every case, from any and all claims
and causes of action, of whatever kind or nature, whether in law or in equity
and whether known or unknown, that AFFYMETRIX or its AFFILIATES now has, ever
had, or could in the future have (but for this release) against the ILLUMINA
Released Parties, asserted in, arising out of, resulting from, or relating in
any way to the ACTIONS or that are otherwise based on CURRENT PRODUCTS. 
Notwithstanding the preceding provisions of this Section 3.1 or any other
provision of this Agreement, all actions to enforce payment of amounts due under
Section 4.1 of this Agreement, and to enforce claims against any future acts of
patent infringement not covered by the covenants in Article II, are expressly
preserved.

 

3.2           ILLUMINA, for itself, its AFFILIATES, their successors and
assigns, hereby irrevocably and unconditionally (except for the covenants
specified in Sections 2.1 and 2.2) releases, acquits and forever discharges
AFFYMETRIX and its AFFILIATES, together with their past and present directors,
officers, employees, successors and assigns, and customers (the “AFFYMETRIX
Released Parties”), in each and every case, from any and all claims and causes
of action, of whatever kind or nature, whether in law or in equity and whether
known or unknown, that ILLUMINA or its AFFILIATES now has, ever had, or could in
the future have (but for this release) against the AFFYMETRIX

 

 

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Released Parties, asserted in, arising out of, resulting from, or relating in
any way to the ACTIONS.  Notwithstanding the preceding provisions of this
Section 3.2 or any other provision of this Agreement, all actions to enforce
claims against any acts of patent infringement are expressly preserved.

 

3.3           In consideration of the rights and obligations hereunder, the
PARTIES have agreed to discontinue the ACTIONS and to enter appropriate orders
of dismissal of such ACTIONS with prejudice and without costs and disbursements
(and to make such other filings to effectuate the same) in a Stipulation of
Dismissal agreed to by the PARTIES, and each PARTY hereby agrees to give the
other PARTY written evidence thereof.

 

3.4           The PARTIES assume the risk of any mistake of fact in connection
with the subject matter of the Agreement, the ACTIONS, and with respect to any
fact that is now unknown to the PARTIES or to their officers, directors,
employees, agents or representatives.  Accordingly, as applicable, the PARTIES
expressly waive all rights under Section 1542 of the Civil Code of California
which reads as follows:

 

A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor.

 

 

IV.           PAYMENTS

 

4.1           In complete consideration of the irrevocable and unconditional
releases, waivers and covenants granted hereunder, ILLUMINA shall pay to
AFFYMETRIX the sum of Ninety Million U.S. Dollars ($90,000,000.00 U.S.D.)
payable within five (5) business days of the receipt by the PARTIES of written
evidence that the ACTIONS have been dismissed as required under Section 3.3.

 

4.2           All payments to AFFYMETRIX hereunder shall be made by wire
transfer to                                                  , Account Number
                                           .

 

4.3           The PARTIES agree that each and all payments due by ILLUMINA to
AFFYMETRIX under Section 4.1 are non-refundable, non-creditable against any
other payments that may now be due or will ever be due from ILLUMINA to
AFFYMETRIX, fixed, determined, and are not contingent on any future event or
condition whatsoever on the part of AFFYMETRIX or any other entity.

 

 

V.            THIRD PARTY BENEFICIARIES

 

The PARTIES acknowledge and agree that customers of ILLUMINA and of ILLUMINA’s
AFFILIATES are third party beneficiaries to this Agreement, and that the

 

 

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releases, waivers and covenants granted in Articles II and III of this Agreement
inure to the benefit of all of such customers to the extent provided therein.

 

 

VI.           CONFIDENTIALITY AND PRESS RELEASES

 

This Agreement is strictly confidential and the PARTIES agree not to disclose
any of its terms to third parties, except (i) to governmental entities as
required by law, regulation or subpoena or as otherwise required by law, (ii) to
employees, officers, directors, shareholders, and agents of the PARTIES with a
need to know and who are under an obligation to maintain information of this
nature confidential, (iii) to shareholders and investors but in this instance
the disclosure should be limited to the amounts paid, the timeframe of the
covenants, and the general nature of the relationship, or (iv) as required to
enforce the legal rights of a PARTY before a court or arbitrating body having
applicable jurisdiction.  Notwithstanding the immediately preceding sentence the
PARTIES agree to issue a joint press release to be prepared by ILLUMINA and
reviewed and approved by AFFYMETRIX.

 

 

VII.         NO ADMISSION; NO WARRANTIES

 

7.1           The PARTIES agree that they desire to enter into this Agreement to
avoid uncertainties associated with litigation and to reduce their litigation
expenses.  Consistent therewith, the PARTIES acknowledge and agree that by
entering into this Agreement, (a) ILLUMINA does not in any way admit, and
specifically denies, any infringement of any patents owned by AFFYMETRIX or its
AFFILIATES, and (b) the payment obligations specified in Section 4.1 are
irrevocable and unconditional, and such payments are to be made by ILLUMINA in
their entirety and (without limiting the foregoing) irrespective of any past,
present or future contentions or findings regarding infringement or otherwise
regarding the AFFYMETRIX patents.

 

7.2.          THE PARTIES, ON THEIR OWN BEHALF AND ON BEHALF OF THEIR RESPECTIVE
AFFILIATES, HEREBY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, WITH REGARD TO THE SUBJECT MATTER OF THIS
AGREEMENT (EXCEPT AS EXPRESSLY PROVIDED BELOW IN SECTION 10.7).  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NO WARRANTIES OR REPRESENTATIONS ARE
EXPRESSED OR IMPLIED REGARDING THE SCOPE, COVERAGE, VALIDITY OR ENFORCEABILITY
OF ANY INTELLECTUAL PROPERTY RIGHTS, OR REGARDING THE NON-INFRINGEMENT,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE OF ANY PRODUCTS OR
SERVICES UNDER THIS AGREEMENT.

 

 

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VIII.        ARBITRATION

 

8.1           In the event of any dispute or difference of opinion or
controversy between the PARTIES arising out of or in connection with this
Agreement or with regard to performance of any obligation hereunder by either
PARTY, both PARTIES shall use their reasonable efforts to settle such dispute or
difference of opinion amicably by good-faith negotiation for a period of fifteen
business (15) days, commencing upon the receipt of written demand for
negotiation setting forth clearly and completely the nature and basis of the
dispute and the manner and extent of its proposed resolution.  After the
expiration of the 15-day negotiation period, either PARTY may commence an
arbitration to resolve the dispute set forth in the demand for negotiation as
set forth below.

 

8.2           Subject to Section 8.1 hereof, all disputes, differences of
opinion, or controversies which may arise between the PARTIES out of or in
relation to or in connection with this Agreement or the breach thereof, shall be
finally settled by arbitration in Los Angeles, California by a panel of three
(3) arbitrators (one of whom shall be a registered patent attorney in the field
of biotechnology) selected in accordance with the Rules of the American
Arbitration Association, in the form pertaining at the time the arbitration is
initiated.  The PARTIES shall use their best efforts to complete the arbitration
proceeding within three (3) months.  The arbitration panel is hereby empowered
by the PARTIES to render whatever judgment or relief under this Agreement
(applying California and U.S. Patent laws, as applicable) is deemed appropriate
by the panel, including the power to award specific performance remedies to
enforce this Agreement.

 

8.3           The losing PARTY as determined by the arbitration panel at the
time it makes its award shall pay the costs of any arbitration entered into
pursuant to this Article.  However, each PARTY shall bear its own legal costs,
including attorneys fees and experts fees, incurred in connection with such
arbitration.

 

8.4           Judgment upon the award rendered by the arbitrators or arbitrator,
as applicable, shall be binding, final and unappealable, and may be entered by
any court having jurisdiction thereof.

 

 

IX.           CHANGE OF CONTROL, ASSIGNMENT

 

9.1           The provisions of this Agreement, including the payment by
ILLUMINA and receipt by AFFYMETRIX of all amounts specified in Section 4.1,
shall be binding upon and inure to the benefit of the PARTIES and their
permitted (if any) successors and assigns.

 

9.2.          Each PARTY may assign its rights and obligations hereunder only in
connection with the acquisition of all or substantially all of the assets or
equity interests (whether by merger, recapitalization, reorganization or
otherwise) of that PARTY, provided that the acquiring entity agrees in writing
to be fully bound by all obligations of that PARTY under this Agreement, with a
copy of such writing provided to the other PARTY within ten (10) business days
of the effective date of such assignment.

 

 

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9.3           In the event of any assignment by ILLUMINA as permitted hereunder,
and/or in the event of any CHANGE OF CONTROL with respect to ILLUMINA, the
covenant not to sue granted by AFFYMETRIX under Article II shall be limited in
scope and shall not extend to any then-existing products or technology of the
acquiring/successor entity.

 

9.4           In the event of any assignment by AFFYMETRIX as permitted
hereunder, and/or in the event of any CHANGE OF CONTROL with respect to
AFFYMETRIX, the right granted by ILLUMINA under Section 2.3 shall be limited in
scope and shall not extend to any then-existing products or technology of the
acquiring/successor entity.

 

 

ARTICLE X.         MISCELLANEOUS PROVISIONS

 

10.1         Notice.  Any notice or request with reference to this Agreement
sent to a PARTY shall be sent by express delivery to that PARTY’s President
(with copy to that PARTY’s General Counsel), shall specifically refer to this
Agreement, and shall be deemed to have been sufficiently given for all purposes
on the third business day following the date of mailing.  Unless otherwise
specified in writing, the mailing addresses of the PARTIES shall be as described
below:

 

To ILLUMINA:

 

ILLUMINA, INC.

Attention President

9885 Towne Center Drive

San Diego, CA  92121

Facsimile:  (858) 202-4599

 

To AFFYMETRIX:

 

AFFYMETRIX, INC.

Attention President

3380 Central Expressway

Santa Clara, CA 95051

Facsimile:  (408) 481-0422

 

10.2         Severability.  If any Article, Section, provision or clause of this
Agreement shall be found or held to be invalid or unenforceable by a court or
other decision-making body of competent jurisdiction, in a judgment from which
no further appeal can be taken, the remainder of the Agreement shall remain
valid and enforceable and, to the extent required in the pursuit of this
Agreement, the PARTIES shall negotiate in good faith a substitute, valid and
enforceable provision that reflects the PARTIES’ intent entering into the
Agreement.

 

 

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10.3         Entire Agreement – Modification and Waiver.  The terms and
conditions herein constitute the entire agreement between the PARTIES and
supersede all previous agreements and understandings, whether oral or written,
between the PARTIES with respect to the subject matter hereof, and no prior
agreement or understanding varying or extending the same shall be binding upon
either PARTY.  No modification or waiver of any term of this Agreement shall be
effective unless made in a writing signed by both PARTIES.

 

10.4         Governing Law.  This Agreement shall be governed and interpreted in
accordance with the laws of the United States and the State of California,
without reference to conflicts of law principles.

 

10.5         Interpretation.  Articles, Sections, titles, and headings are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation hereof.  As used herein, the term
“business days” shall mean all days other than Saturdays, Sundays or state
recognized or U.S. federal holidays.   Ambiguities, if any, in this Agreement
shall not be construed against any PARTY, irrespective of which PARTY may be
deemed to have authored the ambiguous provision.

 

10.6         Counterparts.  This Agreement may be executed in identical
counterparts, each of which shall constitute an original and all of which shall
constitute one and the same agreement.  Delivery of signatures by means of
facsimile or electronic mail shall be as effective as original signatures.

 

10.7         Power and Authority.  Each PARTY and its undersigned representative
hereby represents and warrants that it has full power and authority to enter
into this Agreement, and to grant the covenants, releases, dismissals and
waivers set forth hereunder, on behalf of itself, and its AFFILIATES, their
successors and assigns.

 

 

IN WITNESS WHEREOF, the PARTIES have caused their duty authorized officers to
execute this Agreement on the dates indicated below.

 

AFFYMETRIX, INC.

 

ILLUMINA, INC.

 

 

By:

/s/ Kevin M. King

 

By:

/s/ Jay Flatley

 

 

 

 

 

Name:

Kevin M. King

 

Name:

Jay Flatley

 

 

 

 

 

Title:

President

 

Title:

CEO and President

 

 

 

 

 

Date:

1-9-08

 

Date:

1/6/08

 

 

 

 

 

Witness:

/s/ Susanna Chau

 

Witness:

/s/ Chris Cabou

 

 

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