Illumina 10-Q



 






CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.




Exhibit 10.32




JOINT DEVELOPMENT AND LICENSING AGREEMENT




     This JOINT DEVELOPMENT AND LICENSING AGREEMENT (this “Development Agreement”) is made
effective as of the 15th day of May, 2006 (the “Effective Date”) by and among ILLUMINA,
INC., a Delaware corporation having its principal place of business at 9885 Towne Centre Drive, San
Diego, California, 92121, including its subsidiary CyVera Corporation, having a place of business
at 50 Barnes Park North, Wallingford, CT 06492 (hereinafter collectively referred to as
“Illumina”), and DECODE GENETICS, EHF., a limited liability company having its principal
place of business at Sturlugata 8, Reykjavik, Iceland (“deCODE”). Illumina and deCODE are
sometimes referred to herein individually as a “Party” and, collectively, as the
“Parties.” Defined terms have the respective meanings set forth in Section 1 hereof.



RECITALS




     1. deCODE possesses certain Intellectual Property, well-phenotyped patient samples, the
ability to create well-planned clinically and statistically relevant cohorts studies in the disease
states referred to herein, the ability to associate research data generated utilizing those cohorts
to enable the discovery and validation of potentially relevant diagnostic content, and has rights
to contribute Diagnostic Content.



     2. Illumina possesses certain Intellectual Property and has developed a Diagnostic Platform
especially conducive to genotyping multiple SNPs or to assay other relevant diagnostic targets for
clinical diagnostics.



     3. Illumina has also developed a Discovery Platform that can facilitate extension of the
Diagnostic Content to include other members of the molecular pathways defined by the genes in the
Diagnostic Content that may contain variants that further increase the population attributed risk
and therefore the value of the corresponding diagnostic.



     4. The Parties desire to enter into an exclusive co-development collaboration to commercialize
diagnostic assays, pursuant and subject to the terms of this Development Agreement, whereby (a)
deCODE provides Diagnostic Content, (b) Illumina provides the Discovery Platforms to deCODE, (c)
Illumina independently
develops and commercializes a Diagnostic Platform for deploying the Diagnostic Content, and
(d) the Parties co-develop Diagnostic Products for the Diagnostic Platform.



     5. The Parties have executed a Supply Agreement whose terms are contingent upon execution of
this Development Agreement. The Supply Agreement covers the terms and conditions for Illumina to
supply a Discovery Platform for whole genome genotyping to deCODE.



 









 





     NOW, THEREFORE, in consideration of the premises, covenants and agreements set forth herein,
and for other good and valuable consideration, the mutual receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:



1. Definitions.




     As used in this Development Agreement, the following terms, whether used in the singular or
plural, shall have the following meanings:



     “AAA” shall have the meaning set forth in Section 12.1.



     “Affiliate” shall mean any corporation or other business entity (a) in which a Party
owns or controls, directly or indirectly, at least fifty percent (50%) of the outstanding stock or
other voting rights entitled to elect directors, or (b) which owns or controls, directly or
indirectly, at least fifty percent (50%) of the outstanding stock or other voting rights entitled
to elect directors, of a Party, or (c) which is under common control with a Party, through
ownership or control of at least fifty percent (50%) of the outstanding stock or other voting
rights entitled to elect directors; provided, however, in any country where the
local law does not permit foreign equity participation of at least fifty percent (50%), then an
“Affiliate” includes any company in which the Party owns or controls or is owned or controlled by,
directly or indirectly, the maximum percentage of outstanding stock or voting rights permitted by
local law.



     “Allowable Expenses” shall have the meaning set forth in Section 7.3.



     “Bankruptcy Code” shall have the meaning set forth in Section 6.5.



     “BARD1 Breast-cancer associated Variants” shall have the meaning set forth in Appendix
1.



     “Budget” shall mean the annual projected income and related statements for the
Development Effort in a particular calendar year or portion thereof, covering, among other things,
costs and expenses for capital and facility investments, research and development, additional
validation and clinical trials, commercialization and marketing, and to the extent practicable,
reasonable estimates for On-going Development Costs and Other Costs.



     “Change in Control” shall mean and shall be deemed to occur if a Party is involved in
a merger, reorganization, or consolidation in which its shareholders
immediately prior to such transaction would hold less than fifty percent (50%) of the
securities or other ownership or voting interests representing the equity of the surviving entity
immediately after such merger, reorganization or consolidation, or if there is a sale of all or
substantially all of a Party’s assets or business relating to this Development Agreement.



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     “Chip” shall mean the HumanHap300 Genotyping BeadChip or substantially equivalent
product that permits the genotyping of approximately 317,000 SNP loci per Sample using the
InfiniumTM Reagents.



     “COGS” shall have the meaning set forth in Section 7.3.



     “Commercially Reasonable Efforts” shall mean, with respect to the efforts to be
expended by a Party with respect to any objective, reasonable, diligent, good faith efforts to
accomplish such objective as such Party would normally use to accomplish a similar objective under
similar circumstances.



     “Confidential Information” shall mean all Know-How or other information, including,
without limitation, proprietary information and materials (whether or not patentable) regarding a
Party’s technology, products, business information or objectives, that is designated as
confidential by the disclosing Party or is treated as confidential by the disclosing Party in the
regular course of business.



     “Controlled” shall mean, with respect to any Intellectual Property Right, the
possession (whether by license (other than a license granted pursuant to this Development
Agreement) or ownership, or by control over an Affiliate having possession by license or ownership)
by a Party, of the ability to grant to the other Party access, a license or sublicense without
violating the terms of any agreement with any third party.



     “deCODE” shall have the meaning set forth in the preamble to this Development
Agreement.



     “deCODE Marks” shall have the meaning set forth in Section 6.1(d).



     “deCODE Patents” shall have the meaning set forth in Section 6.1(a).



     “Development” shall mean the Parties’ activities directed towards the validation,
development, analysis, manufacture, achievement of regulatory approval for, and sale and marketing
of the Diagnostic Products throughout the world.



     “Development Effort” shall mean the Parties’ Development activities hereunder.



     “Development Agreement” shall have the meaning set forth in the preamble to this
Development Agreement.



     “Diagnostic Content” shall mean have the meaning set forth in Appendix 1.



     “Diagnostic Platform” shall mean the Microbead scanner and associated digitally
encoded Microbead technology currently in development by Illumina or other relevant technology
platforms which the Illumina intends to use for genotyping multiple SNPs or for other relevant
diagnostic targets in the clinical diagnostics market.



     “Diagnostic Products” shall mean any commercially available testing kit or service
able to detect the Diagnostic Content as set forth in Appendix 1.



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     “Discovery Platform” shall mean Illumina’s BeadStation, robots, corresponding LIMS
systems and HumanHap300 Genotyping BeadChip or substantially equivalent product that permits the
genotyping of approximately 317,000 SNP loci per Sample using the InfiniumTM Reagents.



     “Effective Date” shall have the meaning set forth in the preamble to this Development
Agreement.



     “Gross Profit” shall have the meaning set forth in Section 7.3.



     “Illumina” shall have the meaning set forth in the preamble to this Development
Agreement.



     “Illumina Marks” shall have the meaning set forth in Section 6.2(c).



     “Independent Accountants” shall have the meaning set forth in Section 8.2.



     “Industry Communications” shall mean industry communications and Diagnostic Product
press releases, Diagnostic Product branding, commercial trade show positioning and presence,
scientific publications and Diagnostic Product related literature.



     “Intellectual Property” shall mean all U.S. and non-U.S. Patents, Know-How, copyrights
and other intellectual property and proprietary rights (regardless of whether such rights are
registered, unregistered or pending) protectable under the laws of any jurisdiction, together with
all rights under applications therefor and registrations thereof.



     “Intellectual Property Subcommittee” shall have the meaning set forth in Section 2.5.



     “Joint Management Committee” shall have the meaning set forth in Section 2.1.



     “Joint Intellectual Property” shall have the meaning set forth in Section 6.4.



     “Know-How” shall mean any information or materials, whether or not patentable and
whether stored or transmitted in oral, documentary, electronic or other form, Controlled by a Party
during the Term that is necessary or useful for the development, manufacture or commercialization
of Diagnostic Products. Know-How may include, without limitation, ideas, concepts, formulas,
methods, procedures, designs, plans, documents, data, inventions, discoveries, developments,
e-commerce tools, works of authorship, standard operating procedures, quality control testing
procedures, customer
service software and any information relating to research and development plans, experiments,
results, trade secrets (including proprietary processes, inventions, formulae and ideas), and
technical, manufacturing, marketing, financial, regulatory, commercial, personnel and other
business information and plans, and any scientific, clinical, regulatory, marketing, financial and
commercial information or data; in each case, to the extent necessary or useful for the
development, manufacture or commercialization of Diagnostic Products.



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     “LTA4H” shall have the meaning set forth in Appendix 1



     “LTA4H Pathway Genes” shall have the meaning set forth in Appendix 2.



     “Microbead” shall mean a particle of glass, or other suitable substrate material,
having an optically readable digital code therein developed, manufactured and/or sold by Illumina.



     “Net Sales” shall have the meaning set forth in Section 7.3.



     “On-going Development Costs” shall have the meaning set forth in Section 7.3.



     “Operating Profit” shall have the meaning set forth in Section 7.3.



     “Other Costs” shall have the meaning set forth in Section 7.3.



     “Party” shall have the meaning set forth in the preamble to this Development
Agreement.



     “Patents” shall mean U.S. and non-U.S. (i) unexpired letters patent (including
inventor’s certificates) which have not lapsed or been held invalid or unenforceable by a court or
administrative body of competent jurisdiction from which no appeal can be taken or has been taken
within the required time period, including, without limitation, any substitution, extension,
registration, confirmation, reissue, reexamination, renewal or any like filing thereof and (ii)
pending applications for letters patent that have not been the subject of a rejection notice from
which an appeal cannot be taken or in respect of which the applicable period of appeal has expired,
including, without limitation, any continuation, division or continuation-in-part thereof and any
provisional applications.



     “Pricing Guidelines” shall mean the Development’s global pricing strategy and range of
pricing for the Diagnostic Products, which are subject to review and revision by the Joint
Management Committee at least on an annual basis, taking into consideration, changes in currency
exchange rates, market conditions, competitive pricing and industry average sales prices.



     “Progress Reports” shall mean the report generated and reviewed by the Joint
Management Committee describing the progress of the Development.



     “Quarter” shall mean a calendar quarter ending on March 31, June 30, September 30 and
December 31.



     “Reagents” shall mean the InfiniumTM reagent kits that Illumina supplies to allow whole
genome genotyping on a Chip.



     “Samples” shall mean an individual human DNA sample collected for deCODE’s internal
research purposes.



     “SG&A Allocation” shall have the meaning set forth in Section 7.3.



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     “SNP” shall mean a single nucleotide polymorphism.



     “Solely Owned Intellectual Property” shall have the meaning set forth in Section 6.4.



     “Statistical/Informatics Programs” shall have the meaning set forth in Section 6.1(c)
and Appendix 6.



     “Supply Agreement” shall mean the agreement entered into between the Parties dated the
10th day of May, 2006.



     “TCF7L2” shall have the meaning set forth in Appendix 1.



     “TCF7L2 Pathway Genes” shall have the meaning set forth in Appendix 3.



     “Term” shall mean the period of time beginning on the Effective Date and ending on the
date that this Development Agreement expires in accordance with Section 10.1.



2. Management of Development.




     2.1 Formation of Joint Management Committee; Purposes and Principles. Within fourteen
(14) days after the Effective Date, Illumina and deCODE shall establish a committee (the “Joint
Management Committee”) that will govern, subject to approval by authorized representatives of
the respective Parties, and have overall responsibility for the success of the Development Effort.
The purposes of the Joint Management Committee will be (i) to determine the overall strategy for
the Development Effort consistent with the terms and conditions of this Development Agreement, (ii)
to coordinate the Parties’ activities hereunder, and (iii) to develop, approve and effectuate plans
for the Development Effort as provided herein. It is the intent of the Parties to assign
responsibilities for the various operational aspects of the Development Effort to those portions of
their respective organizations which have the appropriate resources, expertise and responsibility
for such functions. The Parties intend that their respective organizations will work together
towards the success of the Development Effort.



     2.2 Membership. The Joint Management Committee shall be composed of an equal number
of representatives appointed by each Party. The Joint Management Committee shall initially have
six (6) members, consisting of three (3) representatives from each Party; provided
that the Joint Management Committee may change its size from time to time by unanimous
consent of its members. A Party’s representatives shall serve at the discretion of such Party and
each Party may replace any of its Joint
Management Committee representatives at any time upon written notice to the other Party. Each
representative appointed by a Party shall have the requisite experience, knowledge and seniority to
be able to make decisions on behalf of such Party with respect to the Development Effort. From
time to time, the Joint Management Committee may establish subcommittees or subordinate committees
(which may or may not include members of the Joint Management Committee itself) to oversee
particular projects or activities, and such subcommittees or subordinate committees shall be
constituted and shall operate as the Joint Management Committee agrees until such particular
projects or



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activities are deemed complete or are no longer required as determined by the Joint
Management Committee.



     2.3 Meetings of the Joint Management Committee. The Joint Management Committee shall
hold meetings at such times as it elects to do so, but in no event shall such meetings be held less
frequently than once every Quarter, unless the Parties mutually agree to an alternate schedule.
The Joint Management Committee shall meet alternately at Illumina’s facilities in San Diego,
California and deCODE’s facilities in Reykjavik, Iceland or at such locations as the Parties may
otherwise agree (including by audio or video teleconference with the consent of each Party). With
the consent of the representatives of each Party serving on the Joint Management Committee, other
representatives of each Party or of third parties involved in the collaboration may attend meetings
of the Joint Management Committee as nonvoting participants. Each Party shall be responsible for
all of its own expenses of participating in the Joint Management Committee.



     2.4 Specific Responsibilities of the Joint Management Committee. In addition to its
overall responsibility for managing the Development Effort, subject to approval by the authorized
representative of the respective Parties, the Joint Management Committee shall have exclusive
responsibility to:



          [*]




     2.5 Intellectual Property Subcommittee. The Joint Management Committee shall organize
the establishment of an Intellectual Property Subcommittee composed of one (1) primary
representative appointed by each Party; provided that each Party may choose to appoint a second
representative if they so choose. The Intellectual Property Subcommittee shall evaluate subject
matter from the Development Effort and make recommendations to the Joint Management Committee
regarding whether a patent application(s) should be filed for such subject matter.



     2.6 Financial Manager. Within fourteen (14) days after the Joint Management Committee
is established, the Joint Management Committee shall appoint one (1) senior financial manager, whom
shall have expertise in the areas of accounting, cost allocation, budgeting and financial
reporting. The financial manager shall have the responsibility for administering all financial,
budgetary and accounting matters that arise in connection with the Development Effort and/or the
Budget, as well as such other duties as may be referred or delegated by the Joint Management
Committee, subject to the overall supervision of the Joint Management Committee. It shall be the
responsibility of the
financial manager to prepare the Budget(s) and, within thirty (30) days following their
appointment, shall prepare and recommend to the Joint Management Committee for its review and
approval, a Budget for the remainder of calendar year 2006. The Budget will include a breakdown of
the operations by month. Thereafter, on or before October 31st of each year the financial manager
shall review and amend the Budget for the next calendar year, as appropriate, for recommendation to
the Joint Management Committee for its review and approval. During any calendar year, the Budget
may only be modified or amended upon written approval of the Joint Management Committee.



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     2.7 Decision-Making. All decisions of the Joint Management Committee shall be made by
unanimous vote of the Parties, with each Party’s representatives collectively having one (1) vote
on behalf of such Party regardless of the number of representatives in attendance. Any deadlocks
in disputes arising from the Joint Management Committee, including as to specific activities to be
conducted and/or cost estimates of elements of the development and commercialization of Diagnostic
Products, shall be promptly referred to designated representatives selected by the Parties’
respective Chief Executive Officers (“Representatives”) or equivalent for resolution. If the
Representatives cannot resolve such dispute, the parties shall agree to a binding arbitration
process as set forth in Section 12.



     2.8 Management Team. Each Party shall appoint a senior representative (who may or may
not be a member of the Joint Management Committee) to act as its project coordinator for all of the
activities contemplated under this Development Agreement. Such project coordinators will be
responsible for the day-to-day worldwide coordination of the Development Effort and will serve to
facilitate communication between the Parties. Such project coordinators will be experienced in
project management and diagnostics and have a general understanding of development, regulatory,
manufacturing and sales and marketing issues.



     2.9 Clinical Advisory Group. The Parties may consider appointment of an independent
clinical advisory group for each diagnostic area for guidance to the Joint Management Committee on
the Development and commercialization of the Diagnostic Products.



     2.10 Development Guidelines.



     (a) General. In all matters related to the Development Effort, the Parties shall
strive to balance as best they can the legitimate interests and concerns of the Parties and to
realize the economic potential of the Diagnostic Products and each Party agrees to use Commercially
Reasonable Efforts to carry out the activities assigned to such Party in this Development Agreement
and/or by the Joint Management Committee. In conducting activities under this Development
Agreement, neither Party shall intentionally prejudice the value of any Diagnostic Product by
reason of such Party’s activities outside of the Development Effort; provided that
nothing in this Development Agreement is intended to require either Party to limit or prejudice the
development or commercialization of products that are not Diagnostic Products. Furthermore,
nothing in this Development Agreement shall be construed as restricting such businesses or imposing
a duty to market
and/or sell and exploit the Diagnostic Products to the exclusion of, or in preference to, any
other product or process, or in any way other than in accordance with its normal commercial
practices.



     (b) Independence. Subject to the terms of this Development Agreement, the activities
and resources of each Party shall be managed by such Party, acting independently and in its
individual capacity. Nothing in this Development Agreement shall constitute or create a joint
venture, partnership, or any other similar arrangement between the Parties and the Parties owe no
fiduciary duty or other duties or obligations to



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each other by virtue of any relationship created
by this Development Agreement. Without limiting the foregoing, the Parties also acknowledge and
agree that if it should be determined by a court of competent jurisdiction or by the arbitration
panel convened pursuant to Section 12, that notwithstanding the foregoing, such duties exist, the
Parties hereby waive same and agree not to assert or rely on same in any proceeding. Neither Party
is authorized to act as agent for the other Party nor shall either Party have the power to bind or
obligate the other Party in any manner.



     (c) Compliance with Applicable Law. Each Party agrees to conduct all of its
activities in furtherance of or in connection with the Development Effort in compliance with all
applicable laws and regulations.



     2.11 Actions by Affiliates. Any action required to be performed by a Party under this
Development Agreement may be performed by an Affiliate of such Party; provided,
however that such Party shall (a) not thereby be relieved of any of its responsibilities
under this Development Agreement, and (b) be jointly and severally responsible with such Affiliate
for failure by such Affiliate to comply with all relevant restrictions, limitations and obligations
in this Development Agreement.



3. Development Plan.




     3.1 The Parties’ intention is to enter into this Development Agreement as a condition to
certain of the terms of the Supply Agreement, wherein deCODE will be provided a Discovery Platform
and a discount on Chips according to the terms and conditions stated therein. In consideration for
the discount offered to deCODE by Illumina in the Supply Agreement and subject to the Development
Agreement, deCODE grants Illumina certain rights to develop and market Diagnostic Products, as
described in Section 6, containing deCODE Diagnostic Content.



     3.2 Subject to the terms and conditions of this Development Agreement, deCODE and Illumina
will hereby agree to undertake the following:



          (a) The Parties will jointly develop Diagnostic Products for the following fields: (1)
myocardial infarction; (2) type 2 diabetes; and (3) breast cancer. Development Effort priority
will be given to the Diagnostic Product for myocardial infarction.




          (b) To perform the activities set forth in Section 3.2(a), the Parties agree to use
Commercially Reasonable Efforts with respect to the following respective undertakings:





	 	(i)	 	Illumina will develop, manufacture, market
and sell Diagnostic Products for deployment on the Illumina
Diagnostic Platform;
	 
	 	(ii)	 	jointly performing clinical validation in
additional populations;





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	 	(iii)	 	jointly performing clinical trials for
Diagnostic Products;
	 
	 	(iv)	 	jointly performing the analysis of the
results, including the use of any Statistical/Informatics Programs
that deCODE has, and
	 
	 	(v)	 	jointly filing for regulatory approval of
the Diagnostic Product(s) with the FDA or equivalent foreign
regulatory body.





          The foregoing joint undertakings shall be effected under the supervision of the Joint
Management Committee.




          (c) deCODE will provide already assayed samples to further enable the Development Effort.




          (d) The Parties have contemplated that additional variants of the genes in the original
Diagnostic Content may be found in Caucasian or other ethnic groups. If such additional variants
are found, the Joint Management Committee will evaluate and determine the value in updating the
original Diagnostic Products.




          (e) As part of the 100,000 Sample project, as described in the Supply Agreement, deCODE will
prioritize running cardiovascular disease, type-2 diabetes and breast cancer patient cohorts on the
Illumina Chips within [*] after the Effective Date, and will further include special analysis of
the genes of the molecular pathways defined by LTA4H, TCF7L2, and the BARD1 Variants. Appendices
2, 3 and 4 identify known pathway members for LTA4H, TCF7L2 and BARD1, respectively. The Joint
Management Committee will evaluate and determine the value of updating the Diagnostic Products.




          (f) If the Joint Management Committee so determines, the Parties will co-develop any updates
to the original Diagnostic Products.




     3.3 Development Effort By One Party. The Parties acknowledge that, from time to time
during the Term, the Parties may differ as to future developments of
Diagnostic Products and one party may elect to discontinue funding the Development Effort of a
Diagnostic Product(s). Any such discontinuation shall constitute termination of the terms of this
Development Agreement which would otherwise apply to such Development Efforts, and the Party that
wishes to proceed with Development Effort shall be free to do so. In such case where one Party
desires to proceed and the other Party does not, the Party continuing the Development Effort will:
(i) pay all its own costs that result from such action; and (ii) compensate the discontinuing Party
with a royalty on sales at [*] of the Operating Profit, after the continuing Party has recovered
all of its unreimbursed Development Efforts associated with that Diagnostic Product, applicable to
that particular Diagnostic Product then in effect, as currently in effect or otherwise as



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agreed to
by the Parties in an amendment hereto (without any influence from the costs of the continuing
Party’s activity) to which the discontinuing Party would otherwise have been entitled. In case an
FDA approved test for the LTA4H gene is not launched by [*], assuming such delay is not caused by
any action or inaction of deCODE, deCODE shall have the right to develop the test with the
platform, manufacturing, launch and/or sales of a third party. Illumina will still receive half of
the operating profit as calculated using the value sharing formula in Section 7.3, taking into
account the contributions of all three parties.



     3.4 Expansion of Field.



     (a) Right of First Negotiation. For projects that are not previously partnered
Illumina shall receive a [*] first right of negotiation to extend its rights beyond those fields
and molecular pathways in the area of cardiovascular including all forms of stroke, myocardial
infarction, and peripheral arterial disease for the term of [*] from signing the contract. deCODE
will negotiate in good faith to enter into a commercially reasonable agreement to do so.



4. Sales and Marketing.




     4.1 Marketing. Illumina will have the primary responsibility for the sale and
marketing of the Diagnostic Products and may enter into distribution agreements with third parties.
Illumina agrees to consider co-marketing arrangements with deCODE or third party opportunities for
distribution proposed by deCODE; provided, that any decision to proceed with such
proposals shall be at Illumina’s sole discretion.



     4.2 Illumina will promote the Diagnostic Products in accordance with this Development
Agreement. Subject to Section 6.1(d), all Diagnostic Products will be co-branded globally with
primary Illumina branding and prominent secondary deCODE branding as approved by the Joint
Management Committee.



5. Manufacturing.




     5.1 Illumina Manufacturing. Illumina shall have manufacturing responsibility for the
Diagnostic Platforms and all associated consumables for the Diagnostic Products. Illumina will
implement the appropriate quality controls for the manufacture of the
Diagnostic Platform and Diagnostic Products and may enter into contract manufacturing
agreements with third parties in order to satisfy its manufacturing obligations hereunder.



6. Intellectual Property.




     6.1 deCODE Grants.



     (a) deCODE hereby grants to Illumina, under Intellectual Property Controlled by deCODE (other
than the deCODE Marks) that, but for the license granted in this Section 6.1(a) would be infringed
or otherwise violated, a royalty-free (except to the extent that royalties are owed to third party
licensors), worldwide, exclusive right (even



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as to deCODE, except to the extent necessary for
deCODE to satisfy it obligations hereunder) and license, with the right to grant sublicenses only
as permitted under Section 6.3, to develop, make, have made, use, offer for sale, sell, have sold
and import the Diagnostic Products. An initial list of the patents and patent applications to be
licensed pursuant to this subparagraph is listed on the attached Appendix 5, and shall be referred
to as “deCODE Patents”. These rights continue even if deCODE were to genotype fewer than the
planned 100,000 Samples as anticipated in the Supply Agreement. Such rights shall survive
expiration or termination of this Development Agreement if Illumina is the Non-Defaulting Party.



          (b) deCODE hereby grants to Illumina, under all Intellectual Property that (i) deCODE develops
during the Term, and (ii) was developed by funding approved by the Joint Management Committee, a
perpetual, royalty-free (except to the extent that royalties are owed to third party licensors, in
which event such royalties shall be deducted by deCODE in determining COGS), worldwide,
co-exclusive right with deCODE and license, with the right to grant sublicenses only as permitted
under Section 6.3, to develop, make, have made, use, offer for sale, sell, have sold and import the
Diagnostic Products. Any issued patents and patent applications resulting from Intellectual
Property invented or discovered pursuant to this Section 6.1(b) and which subject to Section 6.4
are determined to be deCODE Solely Owned Intellectual Property shall be considered to be deCODE
Patents. Such rights shall survive expiration or termination of this Development Agreement if
Illumina is the Non-Defaulting Party.




          (c) deCODE hereby grants to Illumina during the Term, a limited, royalty-free, non-exclusive
right and license, with the right to grant sublicenses only as permitted under Section 6.3, to
access and use the Statistical/Informatics Programs, defined in Appendix 6, that were developed by
deCODE to define phase of haplotypes based on measured SNPs along with accuracy parameters, for use
in the Development Effort.




          (d) deCODE hereby grants Illumina during the Term, a limited, royalty-free, non-exclusive
right and license, with the right to grant sublicenses only as permitted under Section 6.3, to the
use of certain of its trademarks and service marks, trade names and logos to be specifically
identified by deCODE (collectively hereinafter referred to as “deCODE Marks”) solely in
connection with the commercialization activities provided for in this Development Agreement.
Illumina agrees to comply with
deCODE’s guidelines delivered to Illumina from time to time with respect to manner of use, and
to maintain the quality standards of deCODE with respect to the goods sold and services provided in
connection with the deCODE Marks. Illumina recognizes and agrees that no ownership rights are
vested or created by the limited rights of use granted to Illumina in connection with this use of
the deCODE Marks, and that all goodwill associated with the use thereof inures to the benefit of
deCODE. Further, Illumina shall submit to deCODE any materials bearing the deCODE Marks for review
and approval prior to the use thereof and shall make no use of the deCODE Marks without deCODE’s
prior written consent. Each Party shall execute any documents required in the reasonable opinion
of the other Party for Illumina to be entered as a “registered user”, recorded


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          licensee, or to
demonstrate use, of the deCODE Marks, or to be removed as registered user or licensee thereof.




     6.2 Illumina Grants.



          (a) Illumina hereby grants to deCODE a discount on Chips pursuant to the terms and conditions
set forth in the Supply Agreement.




          (b) Illumina hereby grants to deCODE, under all Intellectual Property that (i) Illumina
develops during the Term, and (ii) was developed by funding approved by the Joint Management
Committee, a perpetual, royalty-free (except to the extent that royalties are owed to third party
licensors, in which event such royalties shall be deducted by Illumina in determining COGS),
worldwide, co-exclusive right with Illumina and license, with the right to grant sublicenses only
as permitted under Section 6.3, to develop and use the Diagnostic Products in accordance with this
Development Agreement. Such rights shall survive termination of this Development Agreement if
deCODE is the Non-Defaulting Party.




          (c) Illumina hereby grants deCODE during the Term, a limited, royalty-free, non-exclusive
right and license, with the right to grant sublicenses only as permitted under Section 6.3, to the
use of certain of its trademarks and service marks, trade names and logos to be specifically
identified by Illumina (collectively hereinafter referred to as “Illumina Marks”) solely in
connection with the commercialization activities provided for in this Development Agreement.
deCODE agrees to comply with Illumina’s guidelines delivered to deCODE from time to time with
respect to manner of use, and to maintain the quality standards of Illumina with respect to the
goods sold and services provided in connection with the Illumina Marks. deCODE recognizes and
agrees that no ownership rights are vested or created by the limited rights of use granted to
deCODE in connection with this use of the Illumina Marks, and that all goodwill associated with the
use thereof inures to the benefit of Illumina. Further, deCODE shall submit to Illumina any
materials bearing the Illumina Marks for review and approval prior to the use thereof and shall
make no use of the Illumina Marks without Illumina’s prior written consent. Each Party shall
execute any documents required in the reasonable opinion of the other Party for deCODE to be
entered as a “registered user”, recorded licensee, or to demonstrate use, of the Illumina Marks, or
to be removed as registered user or licensee thereof.




     6.3 Sublicensing and Extension of Rights. Either Party may, subject to the prior
written approval of the other Party on a case-by-case basis, sublicense its rights under the
licenses granted pursuant to Section 6.1 or 6.2, as the case may be; provided,
however, that no consent or approval shall be required for either Party to extend such a
sublicense to its Affiliates and/or third party distributors for Diagnostic Products. All such
sublicenses (other than sublicenses to Affiliates and/or third party distributors for Diagnostic
Products) shall be granted pursuant to a written agreement that subjects the sublicensee to all
relevant restrictions, limitations and obligations in this Development Agreement; provided,
that no such sublicensee shall be permitted to further sublicense. A Party sublicensing
its rights pursuant to this Section 6.3 shall be jointly and severally



13









 







responsible with each of its
sublicensees (including its Affiliates) for failure by such sublicensee to comply with all relevant
restrictions, limitations and obligations in this Development Agreement.



     6.4 Ownership; Reservation of Rights. The Parties shall jointly own all inventions
and Intellectual Property developed jointly from projects funded by On-Going Development Costs
during the term of this Development Agreement by employees, agents and consultants of deCODE and
Illumina, respectively, on the basis of each Party having an undivided interest in the whole
(collectively, “Joint Intellectual Property”). Other than Joint Intellectual Property,
each Party shall own, to the exclusion of the other Party, all inventions and Intellectual Property
developed by such Party, its employees, agents and consultants, regardless of whether funded by
On-Going Development Costs (collectively, “Solely Owned Intellectual Property”). For
purposes of determining whether an invention or Intellectual Property Right is Joint Intellectual
Property or Solely-Owned Intellectual Property, questions of inventorship and/or ownership shall be
resolved in accordance with applicable United States laws. Each Party reserves all rights not
expressly granted in this Development Agreement, and no licenses are granted by such Party under
this Development Agreement, whether by implication, estoppel or otherwise, except as expressly set
forth herein and nothing in this Development Agreement is intended to be or should be construed as
an assignment of any Intellectual Property Controlled by either Party prior to the Effective Date
or thereafter. The Parties shall jointly share the costs associated with prosecution of Joint
Intellectual Property.



     6.5 Bankruptcy. All rights and licenses granted pursuant to this Development
Agreement are, for purposes of Section 365(n) of Title 11 of the United States Code, as amended,
and any foreign equivalents thereof (“Bankruptcy Code”), licenses of rights to
“intellectual property” as such term is used in Bankruptcy Code. Each Party in its capacity as a
licensor hereunder agrees that, in the event of the commencement of bankruptcy proceedings by or
against such Party under Bankruptcy Code, the other Party, in its capacity as a licensee of rights
under this Development Agreement, shall retain and may fully exercise all of such licensed rights
under this Development Agreement (including the license granted hereunder) and all of its rights
and elections under Bankruptcy Code.



     6.6 Infringement by Third Parties. Each Party shall promptly notify the other Party
in writing of any suspected, alleged or threatened infringement or violation of any Intellectual
Property Controlled by either Party, or of the Joint Intellectual Property, that
covers the development, manufacture, use or sale of the Diagnostic Products of which it
becomes aware.



          (a) The Party Controlling the Intellectual Property suspected, alleged or threatened to be
infringed shall have the right, but not the obligation, to control the prosecution of any
infringement or violation. In the event that such Party brings an infringement action in
accordance with this Section 6.6(a), the other Party shall cooperate fully, including, if required
to bring such action, the furnishing of a power of attorney. If one Party brings any such action
or proceeding, the other Party agrees to be joined as a party plaintiff and to give the first Party
reasonable assistance and authority to file and

14









 








prosecute the suit. The costs of any litigation
commenced pursuant to this Section 6.6(a), including attorneys’ fees and expenses, shall be borne
by the Party commencing such litigation. The Party bringing or threatening such litigation shall
be entitled to any recovery realized as a result of any settlement or litigation.




          (b) In respect of Joint Intellectual Property, Illumina shall have the first right, but not
the obligation to bring suit and control the prosecution of any infringement or violation. deCODE
shall have the right, but not the obligation, before commencement of such action or proceeding, to
be joined as a party plaintiff and to be represented separately by counsel of its own choosing. In
no event shall Illumina enter into any settlement, consent judgment or other voluntary final
disposition which would adversely affect deCODE’s rights under this Development Agreement, without
deCODE’s prior written consent, not unreasonably withheld. If Illumina declines to proceed with an
infringement suit, deCODE may proceed. The costs of any litigation commenced pursuant to this
Section 6.6(b), including attorneys’ fees and expenses, shall be borne by the Party commencing such
litigation. The Party bringing or threatening such litigation shall be entitled to any recovery
realized as a result of any settlement or litigation. Notwithstanding the foregoing, if the
Parties jointly prosecute an infringement action pursuant to this Section 6.6(b) any recovery or
damages shall be first used to reimburse the Parties for their respective documented out-of-pocket
legal expenses relating to the suit, with any remaining amounts to be shared equally by the
Parties.




     6.7 Defense and Settlement of Third-Party Claims Against Diagnostic Products. If a
third party asserts that an Intellectual Property right Controlled by it is infringed or otherwise
violated by the development, manufacture, use or sale of any Diagnostic Product, the Party first
obtaining knowledge of such a claim shall immediately provide the other Party notice of such claim
and the related facts in reasonable detail. In such event, except for third party claims covered
by Sections 11.5 or 11.6:



          (a) The Parties shall determine how best to control the defense of any such claim (including
the bringing of a declaratory judgment action) with respect to the Diagnostic Products;




          (b) The Party receiving the claim shall have the right, but not the obligation, to control
such defense, and in such event the other Party shall cooperate in
the defense and shall have the right to be represented separately by counsel of its own
choice;




          (c) The Party (whether deCODE or Illumina) that controls the defense of a given claim with
respect to Diagnostic Products shall also have the right to control settlement of such claim;
provided, however, that if one Party controls, no settlement shall be entered into
without the consent of the other Party if such settlement would adversely affect the interests of
such other Party in a manner different from the interests of the defending Party; and




15









 








          (d) The expenses of defending and/or settling a third-party claim relating to Diagnostic
Products shall be a shared expense of the Parties.




7. Financial Provisions.




     7.1 Development Funding. Both Parties shall share equally the On-going Development
Costs and expenses incurred in performing its obligations under this Development Agreement
consistent with the Budgets and other financial considerations included in the responsibilities of
the financial manager as approved by the Joint Management Committee pursuant to Sections 2.6 and
2.7.



     7.2 Illumina will have the responsibility for accounts payable, accounts receivable,
purchasing, shipping, receiving, and financial reporting for the Diagnostic Products. Both Parties
will have responsibility for tracking their On-going Development Costs.



     7.3 Value Sharing. deCODE and Illumina will share in the profits of the collaboration
contemplated hereby after subtraction of appropriate costs by both Parties. Illumina will book all
revenue from sales of Diagnostic Products. For the purpose of this Development Agreement:



          (a) “Allowable Expenses” shall mean [*]




          (b) “COGS” shall mean [*]




          (c) “Gross Profit” shall mean [*]




          (d) “Net Sales” shall mean [*]




          (e) “On-going Development Costs” shall mean [*]




          (f) “Operating Profit” shall mean [*]




          (g) “Other Costs” shall mean [*]




          (h) “SG&A Allocation” shall mean [*]




          (i) “Commercialization Costs” shall mean [*]




     To the extent that Allowable Expenses exceed Gross Profit, both Parties would share equally in
such losses.



     7.4 Profit Share. [*]



     7.5 Reporting and Payment.




16










 







          (a) deCODE Reports. deCODE shall prepare an expense report on a monthly basis
laying out its Allowable Expenses incurred in the previous month. deCODE shall aim to prepare and
submit its expense report to Illumina within five (5) business days of the end of the relevant
month but no later than ten (10) business days of the end of the relevant month.




          (b) Illumina Reports. Illumina shall prepare a sales and expense report on a monthly
basis laying out the Net Sales, COGS and its Allowable Expenses incurred in the previous month and
calculate the Gross Profit and the Parties’ respective allocation of such Gross Profit. Illumina
shall prepare and submit its sales and expense report to deCODE within ten (10) business days of
the end of the relevant month.




          (c) Payment. The Parties may not have equivalent expenses in a given quarter. It is
the intention of the Parties to make a net payment to the Party that incurred more cost in a given
Quarter in order to true-up the expenses. This payment will be made within thirty (30) days of the
end of the Quarter. Upon commercialization of the Diagnostic Products Illumina shall pay deCODE
its share of Operating Profit from commercialization of Diagnostic Products within forty-five (45)
days of the end of each Quarter.




     7.6 United States Dollars. All payments required to be made pursuant to this
Development Agreement shall be made in United States dollars. All dollar ($) amounts specified in
this Development Agreement are United States Dollar amounts. For purposes of computing Operating
Profits, all revenues earned or expenses incurred in foreign currencies shall be converted to
United States dollars using the same foreign exchange rate Illumina uses for preparing its
consolidated financial statements filed with the United States Securities and Exchange Commission.
Any benefit or detriment to either Party resulting from currency exchange rate fluctuations shall
be shared equally by the Parties.



     7.7 Tax Matters. The Parties shall use all reasonable efforts to reduce or otherwise
optimize, in a manner consistent with applicable laws, tax withholding on payments, if any, made
pursuant to this Development Agreement. Each Party agrees to cooperate in good faith to provide
the other Party with such documents and certifications as are reasonably necessary to enable such
other Party to minimize any withholding tax obligations. The Parties will reasonably cooperate in
providing one another with documentation of the payment of any withholding taxes paid pursuant to
this Section 7.7 and in completing and filing documents required under the provisions of any
applicable tax laws or under any other applicable law in connection with the making of any required
tax payment or withholding payment, or in connection with any claim to a refund of or credit for
any such payment.



8. Records and Audits.




     8.1 Records. Each Party shall keep accurate books and accounts of record relating to
the research and development, manufacture, marketing and sale of the Diagnostic Products (including
the Operating Profits, number of bases sold, Gross Profit,



17









 







Net Sales, COGs and SG&A), in sufficient detail to permit accurate determination of all
figures necessary for verification of amounts required to be paid hereunder. Each Party shall
maintain such records for a period of at least two (2) years after the end of the calendar year in
which they were generated.



     8.2 Audits. During the Term and for one (1) year thereafter, each Party shall permit,
upon thirty (30) days’ prior written notice from the other Party, an independent certified public
accounting firm of national standing selected by the auditing Party (the “Independent
Accountants”) to examine its relevant books and records as may be reasonably necessary to
verify the accuracy of any payments or invoicing required to be made hereunder. Such examination
shall be limited to the pertinent books and records for any calendar year ending not more than two
(2) years before the date of the request. Neither Party shall be entitled to an examination of the
other Party’s books and records under this Section 8.2 more than once in any calendar year. The
Independent Accountants shall be provided access to such books and records at the audited Party’s
facility(ies), as applicable, where such books and records are normally kept and such examination
shall be conducted during normal business hours. Either Party may require the Independent
Accountants to sign a standard non-disclosure agreement before providing the Independent
Accountants access to facilities or records. Upon completion of the examination, the Independent
Accountants shall provide to both Parties a written report disclosing whether the reports submitted
by the audited Party are correct or incorrect, whether the relevant payments are correct or
incorrect, and, in each case, the specific details concerning any discrepancies. No other
information will be provided to the auditing Party by the Independent Accountants.



     8.3 Reconciliation. If the review by the Independent Accountants reveals an over- or
under-payment under this Development Agreement, then the Parties shall reconcile such payments
within thirty (30) days following the delivery of the Independent Accountants’ report pursuant to
Section 8.2. The auditing Party shall bear the costs and fees of the Independent Accountants
associated with examinations pursuant to Section 8.2; provided, however, that in
the event that it is determined by the Independent Accountants that the aggregate amount of
payments remitted by the audited Party to the auditing Party during the time period covered by the
records reviewed by the Independent Accountants were less than ninety-five percent (95%) of the
aggregate amount of payments that should have been paid by the audited Party during such time
period, then the audited Party shall reimburse the auditing Party for the fees and expenses of the
Independent Accountants with respect to such audit.



     8.4 GAAP. All books and accounts of record required to be kept pursuant to Section
8.1 and all calculations made for the purposes of calculating Operating Profits pursuant to Section
7.3, shall, in each case, be prepared and maintained in accordance with GAAP. However, for purposes
of the Development Agreement, expenses recorded related to stock compensations expense will be
excluded from all calculations.



18









 





9. Confidentiality.




     9.1 Confidentiality. All Confidential Information disclosed by a Party to the other
Party during the term of this Development Agreement shall not be used by the receiving Party except
in connection with the activities contemplated by this Development Agreement, shall be maintained
in confidence by the receiving Party, and shall not be disclosed by the receiving Party to any
other person, firm, or agency, governmental or private, without the prior written consent of the
disclosing Party, except to the extent that the Confidential Information disclosed by the
disclosing Party, as can be demonstrated by the receiving Party’s records however maintained: (a)
was known or used by the receiving Party prior to its date of disclosure to the receiving Party; or
(b) either before or after the date of the disclosure by the disclosing Party to the receiving
Party, is lawfully disclosed to the receiving Party by sources other than the disclosing Party
rightfully in possession of the Confidential Information; or (c) either before or after the date of
the disclosure to the receiving Party, becomes published or generally known to the public
(including information known to the public through the sale of products in the ordinary course of
business), without the receiving Party or its sublicensees violating this Section 9.1; or (d) is
independently developed by or for the receiving Party without reference to or reliance upon the
disclosing Party’s Confidential Information.



     9.2 Remedies. Each Party acknowledges that due to the unique nature of the
Confidential Information, any breach of the restrictions contained in this Section 9 is a material
breach of this Development Agreement, which may cause immediate and irreparable harm for which
money damages would not be an adequate remedy. Any such breach shall entitle the disclosing Party
to seek injunctive relief in addition to all remedies that may be available in law, in equity or
otherwise.



     9.3 Publicity. Each Party may issue a press release after the execution of this
Development Agreement, subject to the provisions of the following sentence. Neither Party shall
issue any press release or public announcement relating to the Diagnostic Products or this
Development Agreement without the prior written approval of the other Party, which approval shall
not be unreasonably withheld, except that a Party may issue such a press release or public
announcement if required by Law, including without limitation by the rules or regulations of the
United States Securities and Exchange Commission or any stock exchange or Nasdaq; provided
that the other Party has received prior notice of such intended press release or public
announcement if practicable under the circumstances and the Party subject to the requirement
includes in such press release or public announcement only such information relating to the
Diagnostic Products or this Development Agreement as is required by such Law; provided
that the party subject to the requirement shall use its reasonable and lawful efforts to
avoid and/or minimize the degree of such disclosure. The rights of approval and notice granted to
a Party in accordance with the preceding sentence shall not apply to subsequent public discussions
relating to a press release or public announcement that has previously been reviewed and approved
by the other Party, provided that the contents of such subsequent public discussions are
substantially similar to the information that has previously been reviewed and approved.



19









 





     9.4 Joint Press Release. The Parties will issue a mutually agreed upon joint press
release within five (5) days of the Effective Date and will issue mutually agreed upon joint press
release at the launch of each Diagnostic Product. 



10. Term and Termination.




     10.1 Term. The initial Term of this Development Agreement shall begin on the Effective
Date and will continue, unless sooner terminated pursuant to Section 10.2, until the last-to-expire
claim of a Patent covering Diagnostic Content.



     10.2 Termination. This Development Agreement may be terminated by a Party (the
“Non-defaulting Party”) in the event that the other Party (the “Defaulting Party”): (a) or one or
more of its Affiliates materially breaches any term of this Development Agreement, if after written
notification the breach is not cured within ninety (90) days, or (b) becomes the subject of a
voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency,
receivership, liquidation or composition for the benefit of creditors that is not dismissed within
sixty (60) days. If the Defaulting Party disputes it is in material breach, then it may institute
an arbitration proceeding as provided in Section 12. If the cure period for material breach
expires, and the Non-Defaulting Party terminates this Development Agreement, the Non-Defaulting
Party may institute an arbitration proceeding as provided in Section 12 to seek its remedies.



     10.3 Effect of Expiration or Termination.



          (a) All rights and obligations of the Parties set forth herein that expressly or by their
nature survive the expiration or termination of this Development Agreement, including provisions of
Sections 1, 6.1(a), 6.1(b), 6.2(b), 6.4, 6.5, 8, 9, 10.2, 10.3, 11, 12 and 13 shall continue in
full force and effect subsequent to and notwithstanding the expiration or termination of this
Development Agreement, until they are satisfied or by their nature expire and shall bind the
Parties and their legal representatives, successors, and permitted assigns. Termination of this
Development Agreement shall not relieve the Parties of any liability which accrued hereunder prior
to the effective date of such termination nor preclude either Party from pursuing all rights and
remedies it may have hereunder or at law or in equity with respect to any breach of this
Development Agreement nor prejudice either Party’s right to obtain performance of any obligation.




          (b) If the Development Agreement is terminated pursuant to Section 10.2 and the
Non-Defaulting Party wishes to continue with the Development Effort, commercialization and
marketing of Diagnostic Products that (i) were under Development or (ii) were commercialized or
marketed, at the time of the effective date of the termination, it may do so subject only to the
obligation to pay to the Defaulting Party the amounts due under Section 3.3 as they become due;
provided, however, in the event that such termination was due to material breach, the
Non-Defaulting Party shall only be obligated to pay to the Defaulting Party the amounts due to the
discontinuing Party under Section 3.3 as they become due.




20









 








11. Representations and Warranties; Limitation of Liability.




     11.1 Mutual Representations and Warranties. Each Party represents and warrants to the
other Party that (i) it has the full corporate right, power and authority to enter into this
Development Agreement and to perform its obligations hereunder, (ii) the execution of this
Development Agreement and the performance of its obligations hereunder does not and shall not
conflict with or result in a material breach (including with the passage of time) of any other
agreement to which it is a party or by which any of its assets or properties is bound or affected,
and (iii) this Development Agreement has been duly executed and delivered by such Party and
constitutes the valid and binding agreement of such Party, enforceable against such Party in
accordance with its terms, except to the extent that enforceability is limited by public policy or
creditors’ rights generally.



     11.3 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS DEVELOPMENT AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY
DIAGNOSTIC PRODUCTS, THE DISCOVERY PLATFORM, THE DIAGNOSTIC PLATFORM OR ANY OTHER PRODUCTS OR
SERVICES PROVIDED IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, OR ARISING FROM COURSE OF
PERFORMANCE, DEALING, USAGE OR TRADE.



     11.4 Without prejudice to the foregoing, the Joint Management Committee shall approve of the
representations and warranties that may be granted to Diagnostic Product customers and the
liabilities arising from breaches of such representations and warranties and any insurance obtained
to limit such liabilities shall be divided between the Parties.



     11.5 Indemnification by deCODE. deCODE shall indemnify, defend and hold harmless
Illumina (including its officers, trustees, employees and Affiliates) against any and all third
party claims, losses, damages, costs or liabilities, including attorneys’ fees and court costs, for
any loss, damage, injury or loss of life, arising out of the development, manufacture, use or sale
of Diagnostic Products under this Development Agreement to the extent attributable to deCODE’s
technology, execution of responsibilities under this Development Agreement, negligence or willful
misconduct. Illumina shall promptly notify deCODE in writing after Illumina has received notice of
any claim under this Section 11.5. deCODE shall have the sole control of the defense, trial and
any related settlement negotiations, provided that Illumina may be represented at its own expense
by counsel of its own choosing and provided further that deCODE may not enter into any settlement
that diminishes the rights or interests of Illumina or requires an admission on the part of
Illumina or incurs financial obligation on the part of Illumina, without Illumina’s prior written
consent. Illumina shall fully cooperate with deCODE in the defense of any such claim.



21









 





     11.6 Indemnification by Illumina. Illumina shall indemnify, defend and hold harmless
deCODE (including its officers, trustees, employees and Affiliates) against any and all third party
claims, losses, damages, costs or liabilities, including attorneys’ fees and court costs, for any
loss, damage, injury or loss of life, arising out of the development, manufacture, use or sale of
Diagnostic Products under this Development Agreement to the extent attributable to Illumina’s
technology, execution of responsibilities under this Development Agreement, negligence or willful
misconduct. deCODE shall promptly notify Illumina in writing after deCODE has received notice of
any claim under this Section 11.6. Illumina shall have the sole control of the defense, trial and
any related settlement negotiations, provided that deCODE may be represented at its own expense by
counsel of its own choosing and provided further that Illumina may not enter into any settlement
that diminishes the rights or interests of deCODE or requires an admission on the part of deCODE or
incurs financial obligation on the part of deCODE, without deCODE’s prior written consent. deCODE
shall fully cooperate with Illumina in the defense of any such claim.



     11.7 LIMITATION OF LIABILITY. EXCEPT FOR VIOLATIONS OF SECTION 9 AND NOTWITHSTANDING
ANY PROVISION TO THE CONTRARY IN SECTIONS 11.5 AND 11.6 OF THIS DEVELOPMENT AGREEMENT, IN NO EVENT
SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL,
EXEMPLARY OR MULTIPLE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS DEVELOPMENT AGREEMENT
OR THE EXERCISE OF ITS RIGHTS HEREUNDER, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.



12. Arbitration.




     12.1 Any dispute, controversy or claim arising out of or relating to the validity,
construction, enforceability or performance of this Development Agreement, including disputes
relating to alleged breach or to termination of this Development Agreement and disputes that cannot
be resolved by the Joint Management Committee, shall be settled by arbitration administered by the
American Arbitration Association (“AAA”) under its Commercial Arbitration Rules, in each
case, not inconsistent with the terms of this Development Agreement, and judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction thereof.
Notwithstanding the above, any disputes, controversies or claims relating in any way to patents,
patent applications, trade secrets, know-how or other Intellectual Property or relating to a breach
of Section 9 shall not be subject to this Section 12. In the event an arbitration is initiated on
an alleged breach, the cure period of Section 10.2 for such alleged breach is stayed pending the
outcome of the arbitration, thus preventing the termination of this Development Agreement during
the arbitration process.



     12.2 The arbitration shall be conducted in New York, New York by a panel of three (3)
arbitrators of the AAA selected as follows: within thirty (30) days after initiation of
arbitration, each Party shall select one (1) person to act as arbitrators and the two (2)
Party-selected arbitrators shall select a third arbitrator within five (5) days of their



22









 







appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the
third arbitrator, the third arbitrator shall be appointed by the AAA as soon as practicable.



     12.3 Each Party shall share equally in the Parties’ total costs of the arbitration, except
that each Party shall be responsible for the costs and expenses incurred in presenting its own case
to the arbitrators, including attorneys’ fees and expenses. Except to the extent necessary to
confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the
existence, content, or results of an arbitration without the prior written consent of both Parties.



     12.4 In no event shall arbitration be initiated after the date when commencement of a legal or
equitable proceeding based on the dispute, controversy or claim would be barred by the applicable
New York statute of limitations.



     12.5 Remedies for Material Breach. At the completion of an arbitration, the
arbitrator may declare one party in material breach of this Development Agreement. The arbitrator
shall issue an order which will contain provisions to resolve the dispute to return the Development
to its pre-notice of breach condition. If such order is implemented, the material breach will be
deemed to have been cured. If unsuccessful, and the Development Agreement terminates as a result
of the material breach, the arbitrators in their discretion may order a remedy to the
Non-defaulting party to allow the Non-Defaulting party to remain in the business of commercializing
Diagnostic Products that were Diagnostic Products during the term of this Development Agreement.
These remedies could include financial compensation, requirements for continued supply, and/or
licenses to Intellectual Property, such that both Parties are fairly compensated. The arbitrators
have no authority to prevent either Party from commercializing products that were Diagnostic
Products under this Development Agreement.



13. Miscellaneous.




     13.1 Severability. If any provision of this Development Agreement is held invalid or
unenforceable, such provision shall be enforced to the maximum extent permissible so as to effect
the intent of the Parties, and the remainder of this Development Agreement will continue in full
force and effect.



     13.2 Waiver. The failure of either Party to exercise any right granted herein or to
require any performance of any term of this Development Agreement or the waiver by either Party of
any breach of this Development Agreement shall not prevent a subsequent exercise or enforcement of,
or be deemed a waiver of any subsequent breach of, the same or any other term of this Development
Agreement.



     13.3 No Third-Party Beneficiaries. Nothing in this Development Agreement is intended
to or shall confer upon any person who is not a Party to this Development Agreement any rights,
benefits or remedies of any nature whatsoever under or by reason of this Development Agreement, nor
shall any such person be entitled to assert any claim hereunder.



23









 





     13.4 Export Control. This Development Agreement is made subject to any restrictions
concerning the export of products or technical information from the United States of America or
other countries which may be imposed upon or related to deCODE or Illumina from time to time. Each
Party agrees that it will not export, directly or indirectly, any technical information acquired
from the other Party under this Development Agreement or any products using such technical
information to a location or in a manner that at the time of export requires an export license or
other governmental approval, without first obtaining the written consent to do so from the
appropriate agency or other governmental entity.



     13.5 Notices. Any notice required or permitted to be given under this Development
Agreement shall be in writing, shall specifically refer to this Development Agreement and shall be
deemed to have been sufficiently given for all purposes on the third day following the date of
mailing if mailed by first class certified or registered mail, postage prepaid and on the date of
delivery if by express delivery service or personally delivered. Unless otherwise specified in
writing, the mailing addresses of the Parties shall be as described below:



	 	 	 	 	 
	 

	 	For deCODE:
	 	deCODE genetics, ehf.,
	 

	 	 	 	Sturlugata 8
	 

	 	 	 	101 Reykjavik
	 

	 	 	 	Iceland
	 

	 	 	 	Attention: President
	 
	 	 	 	 
	 

	 	With a Copy to:
	 	deCODE genetics, ehf.,
	 

	 	 	 	Sturlugata 8
	 

	 	 	 	101 Reykjavik
	 

	 	 	 	Iceland
	 

	 	 	 	Attention: General Counsel
	 
	 	 	 	 
	 

	 	For Illumina:
	 	Illumina, Inc.
	 

	 	 	 	9885 Towne Centre Drive
	 

	 	 	 	San Diego, CA 92121
	 

	 	 	 	Attention: President
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Illumina, Inc.
	 

	 	 	 	9885 Towne Centre Drive
	 

	 	 	 	San Diego, CA 92121
	 

	 	 	 	Attention: Chief Financial Officer






     13.6 Assignment. Neither Party shall assign or transfer this Development Agreement or
any rights or obligations under this Development Agreement, whether voluntary, by operation of law
or otherwise, without the prior written consent of the other Party, except that either Party may
assign or transfer this Development Agreement in its entirety to a successor in connection with the
sale of all or substantially all of such Party’s stock, assets or business, provided that such
successor agrees in writing to be bound by and perform the obligations of the such Party under this
Development



24









 







Agreement and is capable of performing such obligations. A Change in Control of a Party shall
be deemed to be an assignment to a successor for purposes of this Section 13.6. Any assignment or
transfer of this Development Agreement made in contravention of the terms hereof shall be a
material breach and shall be null and void. Subject to the foregoing, this Development Agreement
shall be binding on and inure to the benefit of the Parties’ respective successors and permitted
assigns.



     13.7 Governing Law and Venue. This Development Agreement and performance by the
Parties hereunder shall be construed in accordance with the laws in effect in the State of New
York, U.S.A., without regard to provisions on the conflicts of laws. Each Party consents to the
exclusive jurisdiction of, and venue in, the state and federal courts within New York County, New
York, U.S.A.



     13.8 Force Majeure. Neither Party shall be responsible for any failure to perform or
delay attributable in whole or in part to any cause beyond its reasonable control (other than any
payment obligations), including Acts of God, fire, flood, tornado, earthquake, hurricane,
lightning, government actions, actual or threatened acts of war, terrorism, civil disturbance or
insurrection, sabotage, labor shortages or disputes, failure or delay in delivery by suppliers or
subcontractors, transportation difficulties, shortage of energy or raw materials or equipment, or
the other Party’s fault or negligence.



     13.9 Entire Agreement and Modifications. This Development Agreement supersedes all
prior communications, transactions, and understandings, whether oral or written, with respect to
the subject matter hereof and constitutes the sole and entire agreement between the Parties
pertaining to the subject matter thereof. No modification, addition or deletion, or waiver of any
of the terms and conditions of this Development Agreement shall be binding on either Party unless
made in a written agreement clearly understood by both Parties to be a modification or waiver, and
signed by a duly authorized representative of each Party.



     13.10 Counterparts. This Development Agreement may be executed in one or more
counterparts, each in the English language and each of which shall be deemed to be an original
instrument, and all such counterparts shall together constitute the same agreement.



     13.11 Interpretation. Sections, titles, headings and any table of contents are
inserted for convenience of reference only and are not intended to be a part of or to affect the
meaning or interpretation hereof. The Appendices referred to herein shall be construed with and as
an integral part of this Development Agreement to the same extent as if they were set forth
verbatim herein. As used in this Development Agreement, except as the context may otherwise
require, “include,” “includes” and “including” are deemed to be followed by “without limitation,”
whether or not they are in fact followed by such words or words of like import; references to any
gender include the other; the singular includes the plural and vice versa; and references to
“Section” or another subdivision or to an “Appendix” are to a section or subdivision hereof or an
“Appendix” annexed hereto. As used herein, the term “business days” shall mean all days other than
Saturdays, Sundays or state (recognized in California) or federal holidays. Ambiguities,



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if any, in this Development Agreement shall not be construed against any Party, irrespective
of which Party may be deemed to have authored the ambiguous provision.



     13.12 Non-solicitation. Without the prior written approval of the other Party,
neither Party shall solicit the employment or engagement (as employee, consultant or agent), of any
officer, director or employee of the other Party or solicit such person to terminate his or her
employment and/or engagement with the other Party prior to twelve (12) months after the termination
of this Development Agreement or services of such effected employee, officer or director with
either Party. A general advertisement or a request for employment which is initiated exclusively
by an officer, director or employee of the other shall not be considered a solicitation pursuant to
this Section 13.12.



     IN WITNESS WHEREOF, the Parties hereto have caused this Development Agreement to be executed
by their respective authorized officers as of the day and year first written above.



	 	 	 	 	 
	 	ILLUMINA, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Jay Flatley 	 
	 	 	Title:  	CEO 	 
	 
	 	DECODE GENETICS, EHF.

 	 
	 	By:  	 	 
	 	 	Name:  	Kari Stefansson 	 
	 	 	Title:  	CEO 	 



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Appendix 1




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Appendix 2




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Appendix 3




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Appendix 4




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Appendix 5




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Appendix 6




[*]