Exhibit 10.28



 



EXHIBIT 10.28


Collaboration Agreement

between

APPLIED BIOSYSTEMS AND CEPHEID



THIS AGREEMENT (“Agreement”) is made as of the 11th day of October, 2002 (the
“Effective Date”) and is by and between Applera Corporation, a Delaware
corporation, acting through its Applied Biosystems Group, with a place of
business at 850 Lincoln Center Drive, Foster City, CA 94404, U.S.A. (“ABI”),
and Cepheid, a California corporation with its principal place of business at
904 Caribbean Drive, Sunnyvale, CA 94089 (“Cepheid”). Cepheid and ABI are
sometimes referred to herein individually as a “Party,” and collectively as the
“Parties”.


1.     Background


1.1   Supply to the USPS. ABI and Cepheid will each independently and working
collaboratively seek to develop and manufacture Products for use in Bio-Threat
Agent Detection Systems. These Bio-Threat Agent Detection Systems are intended
to be provided to the USPS through agreements among the USPS, Northrop Grumman
Security Services (“Northrop Grumman”), ETG (Environmental Technology Group,
now known as Smiths-Detection Edgewood, Inc.), and/ or Cepheid, and potentially
others. These Bio-Threat Agent Detection Systems are intended to be used in
conjunction with the mail sorting machines used by the USPS, in order for the
USPS to test for particular bio-threat agents identified as being of interest
to the USPS.


1.2   ABI Materials. The systems that are being provided are based on an assay
called the 5’ nuclease detection process, a process employing in part the
polymerase chain reaction (“PCR”), herein called Real-Time PCR. Due to
licensing constraints imposed by Roche Molecular Systems, Inc. and F. Hoffman
La Roche Ltd (“collectively, Roche”), the owner of some of the patents for the
Real-Time PCR process, certain rules must be followed in order for Cepheid and
the USPS to be properly licensed under the Real-Time PCR patents as
contemplated by this Agreement. [***]ABI owns other rights related to the
Real-Time PCR process [***].


1.3   Intellectual Property Objectives. It is the Parties’ intention that
through this Agreement and the parties’ existing Thermal Cycler Supplier
Agreement obtained from ABI, under which Cepheid is authorized by ABI under
certain of the PCR Rights to manufacture and sell thermal cyclers, and under
which Cepheid manufactures and sells its GeneXpert® thermal cycler instrument,
the Bio-Threat Agent Detection Systems to be sold to the USPS will be fully
licensed or otherwise manufactured and sold with all necessary authority under
all PCR related intellectual property rights of ABI as well as Roche.


1.4   Prior Work by Cepheid. Cepheid has been working in collaboration with the
USPS and Northrop Grumman to develop an initial assay to be used in conjunction
with the GeneXpert Module in order to test for certain strains of Bacillus
anthracis (“anthrax”) of interest to the USPS. Those parties have undertaken
significant initial validation studies in order to satisfy the requirements of
the USPS and, as part of those development activities, certain Third Party
Materials have been and are being used. Cepheid and ABI now wish to develop
and employ Products in which ABI PCR Materials will be used instead of such
Third Party Materials so that certain anticipated advantages of ABI PCR
Materials may be realized, but recognize that the already validated initial
assay will be used during the initial period of implementation by the USPS.
The parties will use their respective commercially reasonable efforts to
demonstrate to the USPS that Products using ABI PCR Materials will meet or
exceed all USPS requirements and specifications and that such Products should
be accepted instead of those using the initial materials. It should be noted,
however, that the ultimate decision as to whether to switch to ABI PCR
Materials may be within the discretion of the USPS. The Parties have begun to
explore the use of ABI PCR Materials and have determined to engage in the Joint
Development Program to


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develop, qualify and validate them for use as the
reagent components of Products, so that a new, validated assay using ABI
materials and employing their anticipated advantages may be substituted for the
initial assay as soon as feasible, preferably within six months of the
Effective Date.


1.5   Special Format Assay. An important feature of this program for the USPS
is the special format of the reagent kit for performing the assay. Cepheid has
developed a method of drying the liquid reagents into a pelletized form. The
dried pellets can be placed into a proprietary self-contained cartridge
developed by Cepheid, in which the reagents can be reconstituted at the time
that the assay is to be performed. The cartridge itself has significant added
value, in that it is the vessel in which the anthrax spores are cracked and in
which Real-Time PCR is performed.


1.6   Purpose. The Parties wish to enter into this Agreement to set forth the
terms and conditions under which development of the initial validated system
described above will be completed, development of second generation Products
will be undertaken, and designated systems will be manufactured and supplied to
the USPS by ABI, either directly or through Cepheid as a distributor of ABI, or
Northrop Grumman or another Third Party or Third Parties distributors or
subdistributors.


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


2.     Definitions. Within the meaning of this Agreement:


2.1   “ABI PCR Materials” means reagents or reagent components, including labeled
and unlabeled oligonucleotides (such as, without limitation, primers and
probes) used in or useful for Real Time PCR, and the polymerase used for the
Real Time PCR that ABI supplies to Cepheid as the packer of Cartridges pursuant
to the Cartridge Packing Agreement for incorporation and use by the USPS in the
Bio-Threat Agent Detection Systems of which Products are a component, and that
ABI manufactures itself or that, on or after the date that Second Generation
Products are fully substituted for initial Products as the Products that are
manufactured and sold to the USPS pursuant to the Distributor Agreement, ABI
sources itself or selects and designates as the Materials to be included in
Products. Without limiting the scope of other materials excluded from the
definition of ABI PCR Materials, the Parties understand and agree that
specifically excluded from ABI PCR Materials are reagent and reagent components
(but not the polymerase, which in all cases is included in ABI PCR Materials)
that Cepheid has obtained from the supplier or suppliers used by Cepheid for
such materials as of the Effective Date, even if ABI obtains such reagents and
reagent components from such suppliers or other suppliers and supplies them to
Cepheid pursuant to the Cartridge Packing Agreement, except for such of such
reagent and reagent components, if any, as ABI specifically selects and
designates to be included in Second Generation Products.


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


2.3   “Authorized Use” means use by the USPS for the detection of anthrax, and
such other bio-threat agents as the Parties may agree in writing are bio-threat
agents to be detected by Products, in the environment in accordance with the
label license set forth in Section 6.3, or such other label license or
limitations as ABI may designate (provided that the Authorized Use stated on
the label license set forth in Section 6.3 is not diminished) or the Parties
may agree upon in writing and which is applicable to the USPS’ use of Products.
Authorized use shall not mean use for human diagnostic or therapeutic
purposes.


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


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


2.6   “Bio-Threat Agent Detection System” means the combination of Cartridges,
GeneXpert Modules and Materials, and other associated materials, if any,
obtained by Cepheid from Third Parties, capable of carrying out Real-Time PCR
based analysis for the purpose of environmental detecting or identifying
designated pathogens or biological agents, including without limitation viral
and bacterial agents. The initial implementation of a Bio-Threat Agent
Detection System is intended to be within the system being developed for the
USPS by a consortium led by Northrop Grumman.


2.7   “Cartridge” means a closed or substantially closed plastic device
containing, among other things, pelletized or dried reagents that is intended
for single or multiple use sample preparation and PCR based DNA analysis and
that is intended and suitable for insertion into, or use as a part of, or is a
part or component of, or an attachment to, an instrument designed to hold such
device and/or facilitate or enable its use, which instrument Cepheid
manufactures or has manufactured, including without limitation the instrument
currently named Cepheid’s GeneXpert Instrument that includes one or more
GeneXpert Modules, or that can be used alone or with other instruments or
devices for such purpose.


2.8   “Cartridge Packing Agreement” means the cartridge packing agreement to be
executed by the Parties concurred with or shortly after the execution and
delivery of this Agreement, as more fully described in Section 3.2.


2.9   “Collaboration ABI Intellectual Property” means all Intellectual Property
Rights arising out of work performed under this Agreement or in furtherance of
this Agreement during the term of this Agreement that are conceived solely by
one or more employees or agents of ABI or its Affiliates, or solely by one or
more employees or agents of ABI or its Affiliates and one or more employees or
agents of a Third Party.


2.10   “Collaboration Cepheid Intellectual Property” means all Intellectual
Property Rights arising out of work performed under or in furtherance of this
Agreement during the term of this Agreement that are conceived solely by one or
more employees or agents of Cepheid or its Affiliates, or solely by one or more
employees or agents of Cepheid or its Affiliates and one or more employees or
agents of a Third Party.


2.11   “Collaboration Joint Intellectual Property” means all Intellectual
Property Rights arising out of work performed by Cepheid under this Agreement
or in furtherance of this Agreement, or out of work performed by ABI under this
Agreement, that are jointly conceived by one or more employees or agents of
Cepheid or its Affiliates and by one or more employees or agents of ABI or its
Affiliates.


2.12   “Confidential Information” means confidential knowledge, Know-how,
practices, processes, products, materials, equipment or information that a
receiving Party has a reasonable basis to believe is confidential to the
disclosing Party or is treated by the disclosing Party as confidential.
Notwithstanding the above, Confidential Information will not include, and
nothing in Section 9 will in any way restrict the rights of either Party to
use, disclose or otherwise deal with, any information which:


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	 	 	(a) can be demonstrated to have been in the public domain as of the date
of this Agreement or thereafter comes into the public domain through no
act of the receiving Party; or
	 
	 	 	(b) can be demonstrated to have been independently known to the
receiving Party prior to the receipt thereof, or is made available to the
receiving Party as a matter of lawful right by a Third Party; or
	 
	 	 	(c) can be demonstrated to have been rightfully received by the
receiving Party from a Third Party who did not require the receiving
Party to hold it in confidence or limit its use, or on the basis of a
restriction that has lapsed, and who did not acquire it, directly or
indirectly, from the other Party to this Agreement under a continuing
obligation of confidentiality; or
	 
	 	 	(d) can be demonstrated to have been independently conceived, invented
or acquired by employees or agents of the receiving Party who have not
been personally exposed to relevant Confidential Information of the other
Party.



2.13   “Distributor Agreement” means the distributor agreement to be entered into
by the Parties concurrently with or promptly after the execution of this
Agreement, which will provide, among other terms and conditions, the terms and
conditions set forth in Section 3.3.


2.14   “Dry Down Process” means the dry down and pelletization process utilized
by Cepheid to dry down and insert or pack Materials into Cartridges.


2.15   “FTEs” shall mean full time employee equivalents of labor, based on a
standard work day. One FTE shall be one employee of a Party working one day,
or eight hours worked collectively by more than one employee of a Party. One
FTE for a year shall be one employee working each work day in a year, exclusive
of holidays and vacation time determined in accordance with the employer’s
customary policies and procedures. For the purposes of this definition of FTEs
only, the term “employee” shall include an individual who is a consultant to a
Party who is subject to a written agreement with such Party that assigns to
such Party all of such individual’s right, title and interest in and to his or
her work product, including without limitation all Intellectual Property Rights
arising out of work performed for such Party.


2.16   “GeneXpert® Module” means a thermally controlled fluorometric thermal
cycling or other type of instrument capable of carrying out or facilitating a
sample preparation procedure, as well as a Real Time PCR assay, in or with the
use of a Cartridge. The GeneXpert Module comprises the instrument portion of
Cepheid’s Bio-Threat Agent Detection System.


2.17   “Intellectual Property Rights” means all intellectual property rights
worldwide arising under statutory or common law, whether or not perfected,
including, without limitation, all (1) patents, patent applications and patent
rights; (2) rights associated with works of authorship including copyrights,
copyright applications, copyright registrations, mask works, mask work
applications and mask work registrations; (3) rights relating to the protection
of trade secrets and confidential information; (4) any right analogous to those
specifically set forth in this definition and any other proprietary rights
relating to intellectual property (other than trademark, trade dress, or
service mark rights); (5) divisions, continuations, continuations-in-part,
renewals, reissues, re-examinations, continuing prosecution, and extensions of
the foregoing existing at a time in question, or thereafter filed, issued or
acquired; and (6) Know-how.


2.18   “Joint Development Program” means the joint development program of the
Parties under which the Parties, pursuant to Section 4 of this Agreement, will
use commercially reasonable efforts to further develop to the extent deemed
necessary by the Parties initial Products, and to develop Second Generation
Products that employ ABI PCR Materials. Initially, under the Joint Development
Program the Parties shall explore the use of TaqMan® reagents as substitutes
for the reagents used in the initial Products.


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2.19   “Know-how” means confidential and/or proprietary technical information,
techniques, processes, methods, data, assays, substances and materials, and
other information in a party’s possession that is not generally available to
the public.


2.20   “Liability” has the meaning set forth in Section 11.2.


2.21   “Manufacturing Cost” means the fully-burdened manufacturing cost of a
product as determined using a Party’s customary practices and procedures and,
to the extent applicable, in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”), including the following: direct
material cost, material overhead cost, direct labor cost, fixed manufacturing
overhead cost, variable manufacturing overhead cost, cost of quality control
and product testing, manufacturing variance cost and other costs that may be
properly attributed to inventory as manufacturing costs pursuant to GAAP, but
excluding royalties or similar consideration paid to Third Parties for rights
to Intellectual Property Rights, including up-front payments for such rights,
even if any such royalties or other payments are included in fully burdened
manufacturing cost in accordance with a Party’s customary practices and
procedures and, to the extent applicable, GAAP). In determining Manufacturing
Cost, the manufacturing Party shall take into account, in accordance with GAAP
to the extent applicable and in accordance with such Party’s normal and
customary practices and procedures, including without limitation consideration
of risks and uncertainties associated with projections related to the Products
in question, projections of sales of such Products for at least a twelve month
period made in good faith by ABI, in consultation with Cepheid, in accordance
with its normal and customary procedures. Manufacturing Cost of Products will
be established and reestablished based upon projections for a period of not
less than the next upcoming twelve month period, may be changed no more
frequently than Quarterly (and any new Manufacturing Cost will be effective
only as of the first day of a Quarter), and any new Manufacturing Cost of
Products will not be applied except upon a minimum of sixty (60) days prior
notice from the manufacturing Party to the other Party, unless the Parties
otherwise agree.


2.22   “Materials” means reagents and reagent components, including without
limitation labeled and unlabeled oligonucleotides (such as, without limitation,
primers and probes) used in or useful for Real Time PCR and the polymerase used
for the Real Time PCR reaction, including without limitation ABI PCR Materials,
reconstitution buffers or solutions, and any other consumable products, limited
life products or other products that are contained in or are a part of and are
sold with a Cartridge, and any such items and any other consumable products or
limited life products, if any, that are not contained in or are a part of, or
are not sold with Cartridges, that are used in connection with the use of a
Cartridge when the Cartridge is used for Real-Time PCR analysis. Specifically
excluded from the definition of Materials is the GeneXpert Module, which
Cepheid will sell to USPS either directly or by way of the Smiths
Industries/Northrop Grumman supply chain or other Third Parties.


2.23   “Net Sales” means the actual amount received from sales of Products to
Third Parties and, unless sold for resale, Affiliates of a Party, less: trade,
cash and quantity discounts, if any, actually allowed, other allowances
actually applied, amounts refunded for faulty or defective product, returns,
rejections, bad debt determined and applied in accordance with the selling
Party’s normal and customary policies and procedures and, to the extent
applicable, GAAP, freight, insurance and other transportation costs, tariffs,
duties, sales tax, and similar governmental charges paid (except income taxes)
paid with respect to the Products sold. It is understood and agreed that sales
or other distribution of Products may only be made to the USPS or to a Third
Party or an Affiliate of a Party for sale to and use by the USPS.


2.24   “Other Chemical Materials” means reagents and reagent components, used in
or useful for Real Time PCR (but not the polymerase used for Real Time PCR,
which is in all cases an ABI PCR Material), reconstitution buffers or
solutions, and any other consumable chemical products, limited life chemical
products or other chemical products that are contained in or are a part of and
are sold with a Cartridge, and any such chemical items and any other consumable
chemical


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products or limited life chemical products that are not contained in
or are a part of, or are not sold with, Cartridges, that are used in connection
with the use of a Cartridge when the Cartridge is used for Real Time PCR,
excluding, in every case, ABI PCR Materials.


2.25   “PCR Rights” means the following patents: those of Roche Molecular
Systems, Inc. and F. Hoffmann-La Roche Ltd : United States Patent Nos.
4,683,202, 4,683,195, 4,965,188, 5,210,015, 5,487,972, 5,476,774, and
5,219,727, and corresponding foreign counterpart patent claims, and Roche’s
United States Patent No. 5,804,375 (Claims 1-12) and foreign counterpart
claims, covering 5’ Nuclease reaction mixtures; and those of Applera
Corporation: United States Patent Nos. 5,538,848, 5,876,930, 6,030,787,
6,258,569 B1 and 5,656,493, and corresponding foreign counterpart patent
claims.


2.26   “Products” means Cartridges containing or employing Materials, including
without limitation, in all cases, the polymerase necessary to perform a PCR
assay constituting an Authorized Use in combination with all such other
reagents, enzymes and other materials as are necessary to perform such PCR
assay.


2.27   “Quarter” means a fiscal quarter of a Party, in each case an approximately
three month period beginning on or about the first day of January, April, July
or October next following the Effective Date, and each three month period
thereafter, except that the first Quarter will include the period from the
Effective Date to the first day of the nearest such three month period after
the Effective Date. Precise dates for the beginning and ending of Quarters may
vary in accordance with a Party’s customary accounting practices and procedures
in accordance with GAAP. Upon a Party’s request, the other Party will provide
the requesting Party with a schedule of the replying Party’s fiscal Quarters.


2.28   “Real Time PCR” means using the 5’ nuclease detection process in the
practice of PCR as is described and claimed in ROCHE’s United States Patents
Nos. 5,210,015 and 5,487,972.


2.29   “Residual Revenue” means [***] from sales of Products during a Quarter by
Cepheid, less (i) unless otherwise expressly set forth in this Agreement, [***]
and (ii) [***] (iii) such other amounts as the Parties expressly agree in
writing are to be deducted from Net Sales for the purpose of determining
Residual Revenues.


2.30   “Second Generation Products” means Products containing and employing for
the identification of bio-threat agents dyes and quenchers that are
manufactured by ABI or, if not manufactured by ABI, that are specifically
identified as second generation dyes and quenchers by ABI in a writing to
Cepheid.


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


2.32   “Work Plan” means a plan of action to accomplish the goals of the Joint
Development Program.


3.     The Initial Reagent Product Supply


3.1   Initial Product Unchanged. Until such time as the parties have completed
their joint development of Second Generation Products, the initial Products
manufactured for the USPS will be the validated initial Products described
above under Background. It is intended that ABI will source the labeled oligos
component of such initial Products from the supplier used by Cepheid as of the
Effective Date. ABI will also use commercially reasonable efforts to
provide[***], or its equivalent, as required for the manufacture of Products.
ABI, through Cepheid as its contract packer of Cartridges, will then dry and
pelletize the oligos and [***]or equivalent and seal the Cartridges for
shipment. The parties will jointly work out a delivery schedule for the oligos
and [***]commensurate with the manufacturing capabilities of the supplier used
by Cepheid as of the Effective Date and the delivery schedule desired by the
USPS. The specifications for the initial


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validated Products shall be those
agreed upon by the Parties, and shall be based on and include the validated
specifications accepted by the USPS, except to the extent the Parties otherwise
agree. Cepheid will use commercially reasonable efforts to pack Cartridges and
ensure that Products meet such specifications. Cepheid will purchase Materials
for such initial Products from ABI, unless ABI is unable to supply such
Materials to Cepheid, in which case Cepheid may purchase such Materials, except
polymerase, from Third Parties.


3.2   Cepheid Appointed as ABI Contract Packer of Cartridges. ABI will engage
Cepheid to be its exclusive packer of Cartridges for sale to or for the use of
the USPS for USPS use in Bio-Threat Agent Detection Systems, pursuant to the
Cartridge Packing Agreement. ABI and Cepheid will execute the Cartridge
Packing Agreement, containing such terms upon which the Parties may mutually
agree in each of their sole discretion, concurrently with or promptly after the
Effective Date. In general, under the Cartridge Packing Agreement, Cepheid
will dry down and pelletize the necessary Materials, pack them into Cartridges,
complete packaging of the Cartridges, and store and maintain same subject to
the order of ABI. ABI will manufacture or source and furnish to Cepheid for
packing all necessary polymerase and all reagents, enzymes and other materials
necessary to perform the anthrax assay or such other assays as the Parties
agree Products will perform. All Products shall labeled as ABI Products as
more fully set forth in Section 5.6 and will be labeled and distributed with
appropriate label licensing statements, as provided in Section 6.3. The price
Cepheid may charge ABI for its packing services shall be capped as set forth in
Section 7.7.


3.3   Cepheid Appointed Distributor. ABI will engage Cepheid to be its
exclusive distributor of Cartridges and associated Materials for sale to the
USPS or a Third Party for resale to the USPS, and use by the USPS in Bio-Threat
Agent Detection Systems, pursuant to the Distributor Agreement. The
Distributor Agreement shall contain such terms and conditions upon which the
Parties may agree in each of their sole discretion, and shall provide that the
transfer price of finished Products sold by ABI to Cepheid as distributor
[***], provided that such price charged to Cepheid as distributor shall not
exceed [***]. The Distributor Agreement shall also provide that Cepheid must
inform ABI of the price of Products to the USPS, the end-user, as ABI’s royalty
to Roche is based on such price.


3.4   Initial Product Intellectual Property Issues. In order to avoid
unnecessary liability, the parties will work together to seek to identify any
Intellectual Property Rights required to manufacture and distribute Products
and seek to resolve same to their mutual satisfaction. [***]


4.     Joint Development Program for Second Generation and Later Products


4.1   Costs; Diligence



	 	 	4.1.1   Work Plan, Budget, Responsibility for Costs, Minimum FTEs.
Immediately after the Effective Date, the Parties shall work together and
use diligent and continuing efforts to establish at the earliest feasible
time a Work Plan for the Joint Development Program. Except as provided
below, each Party will pay its own costs and expenses in connection with
its activities in furtherance of the Joint Development Program.
	 
	 	 	4.1.2   Diligence, Minimum FTEs. Commencing immediately after the
Effective Date, the Parties will use commercially reasonable efforts and
devote personnel each Party reasonable believes are sufficient in
number, skills and experience to conduct the Joint Development Program in
accordance with the terms and conditions of this Agreement. However,
the parties recognize that it is imperative to complete development of
Second Generation Products as soon as feasible. Hence, a major goal of
the collaboration established by this Agreement is to have a completed,
validated Second Generation Products, using ABI PCR Materials if their
advantages can be realized, for use with Bio-Threat Agent Detection
Systems for sale within six months of the Effective Date. Without
diminishing the obligations of the Parties set forth above, until such
time as Second



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	 	 	Generation Products are developed and substituted for
initial Products, unless and until the Parties otherwise agree in
writing, each Party shall assign and commit no less than two (2) FTEs of
research and development personnel continuously to the Joint Development
Program.
	 
	 	 	4.2   Development of Second Generation Products
	 
	 	 	4.2.1   Responsibilities of the Parties. In close consultation with each
other, ABI and Cepheid will attempt to substitute new dyes, quenchers,
polymerases, and/or any other components that the parties deem necessary
to enhance the manufacturability and ease of manufacture of Products.
Each Party will conduct its own tests as it sees fit. Cepheid will have
the responsibility for ensuring that reagents selected by the Parties or
suggested by ABI can be pelletized effectively and that they work in a
manner compatible with the cartridge and associated thermal cycling
instrument. A significant goal of the Joint Development Program is to
enhance the manufacturability and minimize the overall costs to the
Parties of Products.
	 
	 	 	4.2.2   Information Exchange. The Parties will use reasonable efforts to
keep each other informed with respect to all activities directly related
to the Joint Development Program, including without limitation access to
design plans and drawings, specifications, engineering change orders,
software, supplier information, nucleic acid sequences, processes,
materials, validation information, and chemistries directly related to
the Bio-Threat Agent Detection System. Both Parties will participate in
milestone reviews for the Bio-Threat Agent Detection System in accordance
with a schedule to be agreed upon by them.
	 
	 	 	4.2.3   Development Teams. Each Party will assign personnel to its
development team that it believes have the appropriate skills and
experience to accomplish the work established in the Work Plan or to
otherwise achieve the goals of the Joint Development Program. It is
expected that such teams will work together to accomplish the goals of
the Joint Development Program including, if appropriate, conducting
efforts at the same facility.



4.3   Joint Steering Committee



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




	 	(A)	 	General oversight of all aspects of the Joint
Development Program, including definition, development,
manufacturing (supply), marketing, sales, and support of
Products;
	 
	 	(B)	 	development and implementation of the Work
Plan;
	 
	 	(C)	 	development and approval of budgets;
	 
	 	(D)	 	organization of development teams and general
oversight of their activities;
	 
	 	(E)	 	review of forecasts for Net Sales of the
Products; and
	 
	 	(F)	 	initial forum for the resolution of disputes
arising under this Agreement




	 	 	4.3.2   Membership. The Joint Steering Committee will be comprised of
three (3) employees from Cepheid and three (3) employees from ABI. A Party’s members of the



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	 	 	Joint Steering Committee will be appointed by the
Party at its sole discretion.. Substitute employees may be appointed at
any time. The Joint Steering Committee will be chaired in the first year
by a senior representative from Cepheid and thereafter on a rotating
annual basis, by a senior representative from ABI or Cepheid. The
Parties will appoint their respective members of the Joint Steering
Committee, and each Party will disclose such members to the other Party
in writing, promptly after the Effective Date.
	 
	 	 	4.3.3.   Meetings. The Joint Steering Committee will meet as often as is
reasonably necessary to accomplish its purpose but at least quarterly, on
a mutually agreeable date and at a place selected initially by Cepheid,
and then by each Party in turn thereafter. Representatives of either
Party, or both, in addition to members of the Joint Steering Committee,
may attend such meetings at the invitation of either Party. The Joint
Steering Committee may hold meetings by teleconference or videoconference
if they mutually agree. At each meeting, the Party whose member is not
the Chairman of the meeting will appoint a Secretary to record the
minutes of the meeting.
	 
	 	 	4.3.4.   Joint Steering Committee Decisions and Dispute Resolution. A
quorum for the conduct of business at meeting of the Joint Steering
Committee shall consist of at least two members from each Party.
Decisions by the Joint Steering Committee will be made by consensus -
that is, all members in attendance at a meeting at which there is a
quorum must agree. If the Joint Steering Committee is unable to reach
agreement on a matter, within 10 business days the matter will be
submitted for resolution to the Chief Executive Officer of Cepheid and
the President of ABI’s Applied Biosystems Group. In the event that the
Presidents of each Party cannot reach agreement within 10 business days
after receiving notice from the Joint Steering Committee, which period
may be extended by mutual agreement of the Parties, then either Party may
initiate mediation to resolve the matter in accordance with the rules and
procedures set forth in Exhibit 13.18.
	 
	 	 	4.3.5   Records of Decisions. It is anticipated that significant decisions
of the Joint Steering Committee, such as approval of budgets, will be
reflected in written minutes of meetings that will be circulated to all
Joint Steering Committee members for review and comment before being
filed as final records of the Joint Steering Committee.
	 
	 	 	4.3.6   Expenses The Parties will each bear all expenses of their
respective members related to their participation on the Joint Steering
Committee.



5.     General Intellectual Property


5.1   Ownership of Intellectual Property, Certain Infringement Actions Regards
Collaboration Joint Intellectual Property.



	 	 	5.1.1   Background Cepheid Intellectual Property. All rights, title and
interest in and to Background Cepheid Intellectual Property, whether
patentable or copyrightable or not, will belong to and be retained by
Cepheid and will be subject to the terms and conditions of this
Agreement.
	 
	 	 	5.1.2   Collaboration Joint Intellectual Property. All rights, title and
interest in and to Collaboration Joint Intellectual Property, whether
patentable or copyrightable or not, will belong jointly to ABI and
Cepheid and will be subject to the terms and conditions of this
Agreement. Each Party will have the right to independently practice the
Collaboration Joint Intellectual Property, without accounting to the
other Party, only to the extent that the practice of the Collaboration
Joint Intellectual Property by ABI does not require rights under
Background Cepheid Intellectual Property, or any other Intellectual
Property Rights owned by, either partially or wholly, or licensed to
Cepheid (other than by ABI), and that practice of the Collaboration Joint
Intellectual Property by Cepheid does not require rights under Background
ABI Intellectual Property, or any other Intellectual Property Rights



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	 	 	 owned by, either partially or wholly, or licensed to ABI (other than by
Cepheid). Additionally, each Party will have the right but not the
obligation to bring, at its own expense, an infringement action against
any Third Party under its interest in Joint Collaboration Intellectual
Property, subject to the same limitations set forth above with respect to
the practice of the Joint Collaboration Intellectual Property by Cepheid
or ABI. The Parties will assist one another and cooperate in any such
litigation at the other’s reasonable request, and, if a Party is
necessary in order to institute or maintain an infringement suit by the
other Party as defined by law, that Party agrees to be joined in the
suit, at the expense or the prosecuting Party.
	 
	 	 	5.1.3   Background ABI Intellectual Property. All rights, title and
interest in and to Background ABI Intellectual Property, whether
patentable or copyrightable or not, will belong to and be retained by ABI
and will be subject to the terms and conditions of this Agreement.



5.2.   Filing of Patent Applications.



	 	 	5.2.1   Collaboration Cepheid Intellectual Property. Cepheid will have the
first right, using in-house or outside legal counsel selected by
Cepheid’s sole discretion, to prepare, file, prosecute, maintain and
extend patent applications for Collaboration Cepheid Intellectual
Property in countries of Cepheid’s choosing. Cepheid will bear all costs
relating to such activities. Cepheid will solicit ABI’s advice and review
of the patent applications, and Cepheid will take into consideration
ABI’s advice thereon, but whether to implement such advice shall be in
Cepheid’s sole discretion. If Cepheid elects not to prepare, file,
prosecute or maintain certain of the patent applications or any claims
encompassed within the patent applications, in one or more countries,
Cepheid will give ABI notice thereof within a reasonable period prior to
allowing the patents or claims to lapse or become abandoned or
unenforceable, and ABI will thereafter have the right, at its sole
expense and discretion, to prepare, file, prosecute, and maintain the
patent applications or, by means of continuations in part, divisionals or
other appropriate methods, claims, in the name of ABI in the one or more
countries. Cepheid will, at ABI’s expense, assign the patent
applications and claims to ABI and provide reasonable assistance to ABI
to facilitate the filing and prosecution of all the patent applications
or claims that Cepheid has elected not to pursue, and Cepheid will
execute all documents reasonably deemed necessary or desirable by ABI
therefor. Unless otherwise agreed by the Parties in writing, ABI will
provide to Cepheid a royalty-free, worldwide, perpetual, non-exclusive
license, with right to sublicense, under all the patent applications and
claims that Cepheid has elected not to pursue and ABI has elected to
pursue under this Section 5.2.1. If claims describing Collaboration
Cepheid Intellectual Property are combined in a patent application with
claims describing Background Cepheid Intellectual Property that is not
Collaboration Cepheid Intellectual Property, ABI’s rights under this
Section 5.2.1 will be limited to those claims describing Collaboration
Cepheid Intellectual Property. ABI and Cepheid will each hold all
information it presently knows or acquires under this Section 5.2.1 as
Confidential Information in accordance with Section 8.
	 
	 	 	5.2.2   Collaboration ABI Intellectual Property. ABI will have the first
right, using in-house or outside legal counsel selected by ABI’s sole
discretion, to prepare, file, prosecute, maintain and extend patent
applications for Collaboration ABI Intellectual Property in countries of
ABI’s choosing. ABI will bear all costs relating to such activities.
ABI will solicit Cepheid’s advice and review of the patent applications,
and ABI will take into consideration Cepheid’s advice thereon, but
whether to implement such advice shall be in ABI’s sole discretion. If
ABI elects not to prepare, file, prosecute or maintain certain of the
patent applications or any claims encompassed within the patent
applications, in one or more countries, ABI will give Cepheid notice
thereof within a reasonable period prior to allowing the patents or
claims to lapse or become abandoned or unenforceable, and Cepheid will
thereafter have the right, at its sole expense and discretion, to
prepare, file,



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	 	 	prosecute, and maintain the patent applications or, by
means of continuations in part, divisionals or other appropriate methods,
claims, in the name of Cepheid in the one or more countries. ABI will,
at Cepheid’s expense, assign said patent applications to Cepheid and
provide reasonable assistance to Cepheid to facilitate the filing and
prosecution of all the patent applications and claims that ABI has
elected not to pursue, and ABI will execute all documents reasonably
deemed necessary or desirable by Cepheid therefor. Unless otherwise
agreed by the Parties in writing, Cepheid will provide to ABI a
royalty-free, worldwide, perpetual, non-exclusive license, with right to
sublicense, under all the patent applications that ABI has elected not to
pursue and Cepheid has elected to pursue under this Section 5.2.2. If
claims describing Collaboration ABI Intellectual Property are combined in
a patent application with claims describing Background Collaboration ABI
Intellectual Property that is not Collaboration ABI Intellectual
Property, Cepheid’s rights under this Section 5.2.2 will be limited to
those claims describing Collaboration ABI Intellectual Property. ABI and
Cepheid will each hold all information it presently knows or acquires
under this Section 5.2.2 as Confidential Information in accordance with
Section 8.
	 
	 	 	5.2.3   Collaboration Joint Intellectual Property. ABI and Cepheid will
jointly have the right, using in-house or outside legal counsel selected
by both Parties, to prepare, file, prosecute, maintain and extend patent
applications for Collaboration Joint Intellectual Property in countries
of the Party’s choosing. But, if the practice of the Collaboration Joint
Intellectual Property would necessarily infringe claims of patents or
patent applications claiming Background ABI Intellectual Property, the
Collaboration Joint Intellectual Property will, for the purposes of this
Section 5.2.3 only, be treated as Collaboration ABI Intellectual Property
under Section 5.2.2; and, if the practice of the Collaboration Joint
Intellectual Property would necessarily infringe claims of patents or
patent applications claiming Background Cepheid Intellectual Property,
the Collaboration Joint Intellectual Property will, for the purposes of
this Section 5.2.3 only, be treated as Collaboration Cepheid
Intellectual Property under Section 5.2.1. If only one Party (“Filing
Party”) desires to file a patent application in one or more countries,
then the Filing Party will thereafter have the right, at its sole
expense, to prepare, file, prosecute, and maintain the applications in
its own name in the one or more countries; and the other Party will, at
its own expense, assign said patent applications to the Filing Party and
provide reasonable assistance to the Filing Party to facilitate the
filing and prosecution of all the patent applications that the other
Party has elected not to pursue, and the other Party will execute all
reasonable documents deemed necessary or desirable by the Filing Party
therefor. The Filing Party will provide to the other Party a
royalty-free, worldwide, perpetual non-exclusive license, with right to
sublicense, under all the patent applications that the other Party has
elected not to pursue and the Filing Party has elected to pursue under
this Section 5.2.3. ABI and Cepheid will each hold all information it
presently knows or acquires under this Section 5.2.3 as Confidential
Information in accordance with Section 8.



5.3   Interfering Third Party Intellectual Property. If a Party believes that
any activities within the Joint Development Program infringe any Intellectual
Property Rights of a Third Party, that Party will promptly notify the other
Party, and the Joint Steering Committee will seek to agree upon the appropriate
response to be taken.


5.4   Patent Litigation.



	 	 	5.4.1   Defense Against Third Party Claims; Sharing of Costs for Certain
Third Party Infringement Claims. In the event of the institution of any
suit by a Third Party against Cepheid or ABI alleging that the
manufacture, use, sale, distribution or marketing of Products pursuant to
this Agreement infringes a Third Party patent, the Party sued will
promptly notify the other Party in writing. If the infringement claimed
in the suit is an infringement claim with respect to which one Party
indemnifies the other Party pursuant



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	 	 	to Section 11.4.1 or 11.5.1, and the
Party providing the indemnification accepts its indemnification
obligation in a writing to the other Party, the Party affording the
indemnification shall have the right to defend the suit, as set forth in
Section 11. In addition, whether or not such Party accepts its
indemnification obligation in writing, the Party that indemnifies the
other pursuant to Section 11.4.1 or 11.5.1 shall be fully responsible for
such claim in accordance with Section 11.4.1 or 11.5.1, as the case may
be. If the claim of infringement is not a claim with respect to which
one Party indemnifies the other Party pursuant to Section 11.4.1 or
11.5.1, the Parties shall cooperate and select mutually agreeable counsel
to defend the claim on behalf of both Parties; and each Party shall be
responsible for fifty percent (50%) of the costs of defense, and of any
damages that may be finally awarded. If one Party pays more than fifty
percent (50%) of any such defense costs or damages at any time (such as,
for example, if one Party but not the other pays an invoice from defense
counsel), the other Party shall reimburse the paying Party a sufficient
amount so that it shall have paid fifty percent (50%) of the amount paid
within thirty (30) days after receipt of an invoice therefor. No amounts
paid by a Party in the defense of any such suit, or to pay any damages,
shall be deducted from Net Sales for the purposes of determining Residual
Revenue. The Parties will cooperate in the defense of the suit, and
shall jointly instruct defense counsel. However, if the Parties cannot
agree with respect to any matter regarding such defense, ABI shall have
the right to determine the matter, and Cepheid may obtain counsel of its
choosing, at its expense, to defend its interests in the claim, and
neither Party shall have any obligation to reimburse the other for costs
of defense incurred after the date counsel for Cepheid enters its
appearance; provided, that if the matter is a claim covered by subsection
(iv) of Section 11.6A that involves primarily Cartridges and/or GeneXpert
Modules, then Cepheid rather than ABI shall have the right to determine
the matter, and ABI may obtain counsel of its choosing, at its expense,
to defend its interests in the claim, and neither Party shall have any
obligation to reimburse the other for costs of defense incurred after the
date counsel for ABI enters its appearance. However, the Parties shall
each remain responsible for one half of any infringement damages awarded
on account of the manufacture or sale of Products pursuant to this
Agreement, except with respect to claims with respect to which one Party
indemnifies the other Party pursuant to Section 11.4.1 or 11.5.1, as set
forth above. Each other Party will have the right but not the obligation
to defend or participate in the defense of such suit, in addition to the
counsel representing both Parties, at its own expense. Cepheid and ABI
will assist one another and cooperate in any such litigation at the
other’s reasonable request without expense to the requesting Party. A
Party defending any such action alone will have full control over its
conduct, including settlement thereof; however, no settlement of an
action will be made without the prior written consent of the other Party
if such settlement would adversely affect the rights of the other Party,
such consent not to be unreasonably withheld or delayed.
	 
	 	 	5.4.2   Prosecution of Infringement Action. In the event that Cepheid or
ABI becomes aware of actual or threatened infringement of a patent
resulting from Collaboration Cepheid Intellectual Property, Collaboration
ABI Intellectual Property, or Collaboration Joint Intellectual Property,
that Party will promptly notify the other Party in writing. Either owner
of a patent resulting from the intellectual property will have the first
right but not the obligation to bring, at its own expense, an
infringement action against any Third Party and to use the other Party’s
name in connection therewith. If an owner of the patent does not
commence a particular infringement action within 90 days, the other
Party, after notifying the owner in writing, will be entitled to bring
the infringement action at its own expense. The Party conducting the
action will have full control over its conduct, including settlement
thereof. But, no settlement of an action will be made without the prior
written consent of the other Party if such settlement would adversely
affect the rights of the other Party, such consent not to be unreasonably
withheld or delayed. In any event, Cepheid and ABI will assist one
another and cooperate in any such litigation at the other’s reasonable
request without expense to the requesting Party, and, if a Party is
necessary



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	 	 	in order to institute or maintain an infringement suit by the
other Party as defined by law, that Party will join such suit,
represented by its own counsel.
	 
	 	 	5.4.3   Expenses. Cepheid and ABI have the right to first recover their
respective actual out-of-pocket expenses, or proportionate share thereof,
in connection with any litigation or settlement thereof from any recovery
made by any Party. Any excess amount will be shared between ABI and
Cepheid in an amount proportional to their respective out-of-pocket
expenses.
	 
	 	 	5.4.4   Information. The Parties will keep one another reasonably informed
of the status of their respective activities regarding any such
litigation or settlement thereof.



5.5   Effect of Bankruptcy. All rights and licenses granted under this Agreement
by one Party to the other Party are, and will irrevocably be deemed to be,
“intellectual property” as defined in Section 101(56) of Title 11, U.S. Code
(“Bankruptcy Code”). In the event of the commencement of a case by or against
either Party under any Chapter of the Bankruptcy Code, this Agreement will be
deemed an executory contract and all rights and obligations hereunder will be
determined in accordance with Section 365(n) thereof.


5.6   Branding, Trademarks and Non-Proprietary Names. Products distributed to
end users will be branded in such a manner that both Party’s logotypes will
appear with approximately equal weight and size on all packaging, product
inserts and accompanying literature, except to the extent the Parties otherwise
agree. Unless otherwise agreed, the logotypes and brands on Products will
appear approximately as follows on all packaging, labels and product inserts:



	 	 	[Applied Biosystems name and logotype] (Product Name) PCR Kit
	 	 	for use with [Cepheid name and logotype] GeneXpert® Detection Systems



All representations of a Party’s Marks that the other Party intends to use will
first be submitted to such other Party for approval (which will not be
unreasonably withheld or delayed) of design, color and other details. The
Joint Steering Committee, at equally shared expense between each Party, will be
responsible for the selection, registration and maintenance of all trademarks
that it employs to name or identify Products, and both Parties will own and
control such trademarks jointly. Each Party hereby grants to the other Party a
non-exclusive right and license to use the marks, trade names (including
without limitation the names “Cepheid” and “Applied Biosystems”) and logos
(collectively, “Marks”) that the Parties by mutual agreement may employ from
time to time with respect to Products in connection with Cepheid’s contract
manufacture and ABI’s sale and distribution of Products. Except as set forth
in this Section 5.6, nothing contained in this Agreement will grant to either
Party any right, title or interest Marks of the other Party. Each Party hereby
agrees to defend and indemnify the other Party and hold it harmless against
claims by a Third Party that the use by the other Party of a Mark owned by a
Party in a manner expressly authorized by such Party in writing infringes
intellectual property rights of such Third Party.


6.     PCR and Thermal Cycler Licensing, Royalties to Roche, to ABI, and to Third
Parties


6.1   General Explanation of ABI’s Licensing Program. PCR is a proprietary
technology covered by several U.S. patents, including U.S. Patent Nos.
4,683,195, 4,683,202, and 4,965,188, and by issued and pending counterpart
patents outside the U.S that are licensed to ABI or its Affiliates. These
patents are owned by Roche Molecular Systems, Inc. a wholly owned subsidiary of
the F. Hoffmann La Roche Company, and are exclusively licensed to the Applera
Corporation for automated practice in the field of research and other
applications other than human diagnostics. Certain sublicenses to these
patents are administered through Applera Corporation’s ABI Group. These
sublicenses under the PCR process patents are for automated performance of the
PCR process for research and for other designated fields, and include as one
component an up-front fee payable for each thermal cycler used to perform the
PCR process. This establishes a


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Thermal Cycler “Authorization”. The
expression “Authorized” means that the user’s up-front license fee has been
paid. ABI grants rights to thermal cycler manufacturers to include the
Authorization with their thermal cyclers, and to permit manufacturers to sell
their instruments for PCR and to promote their instruments as “Authorized for
PCR”. Under the terms of ABI’s license, manufacturers who pay the fee do not
induce infringement by promoting and advertising their instruments for PCR,
selling to PCR users and supporting such use. In addition, ABI owns patents
that disclose and claim PCR thermal cycler apparatus, automated methods for
performing PCR in thermal cyclers, and systems comprising thermal cyclers
loaded with PCR reagents and programmed to perform a PCR protocol. A number of
these patents have issued to Applera in Europe, the U.S. and elsewhere in the
world. The running-royalty component of the PCR license required for a user to
perform internal research and development activities is obtained through the
user’s purchase and use of thermostable polymerase purchased from a
manufacturer licensed by Roche to sell such polymerase. The rights under this
component of this license are conveyed generally through a label license
accompanying the polymerase.


6.2   Application of the PCR Licensing Program to this Agreement.



	 	 	6.2.1   Background Information. The right to perform PCR-based services in
any of the fields under which ABI has PCR rights (which include
environmental testing such as the bio-threat testing described in this
Agreement performed by Bio-Threat Agent Detection Systems) requires
additional rights beyond those conveyed by the use of a licensed
polymerase with an Authorized Thermal Cycler. Those rights can be
obtained either directly from ABI or through the purchase of products
bearing a valid label license conveying the necessary rights.
Additionally, because Products employ the 5’ nuclease detection assay,
other rights not conveyed through ABI’s basic PCR licensing program must
be otherwise conveyed to the end user. At the present time there is no
program in place to offer separate licenses or authorizations for the
performance of the 5’ nuclease detection assay. As a result, the rights
to perform PCR in conjunction with the 5’ nuclease detection assay under
this Agreement will be provided to the USPS exclusively through such end
user’s purchase of Products comprised of ABI PCR Materials packaged in a
Cartridge and designed for use with Cepheid’s GeneXpert instrument, which
is an Authorized Thermal Cycler.
	 
	 	 	6.2.2   Licensing of Reagents. All PCR rights held by ABI required to
perform the assays for which Products are promoted and sold will be
provided as part of the purchase of Products, and will be reflected in a
label license accompanying Products sold to the USPS.
	 
	 	 	6.2.3   Licensing of Thermal Cycling Instruments. As stated above, the
GeneXpert instrument is an Authorized Thermal Cycler under AB’s Thermal
Cycler Supplier licensing program. The label license authorized by ABI
provided with such instrument defines the instrument as an Authorized
Thermal Cycler under the basic PCR process patents. [***]



6.3   Label License Statements. The following label license, or such other label
license a ABI may designate, shall accompany all Products sold:



	 
	Notice to Purchaser: Limited License
	 
	A license under U.S. Patents 4,683,202; 4,683,195 and 4,965,188 or their
foreign counterparts, owned by Roche Molecular Systems, Inc. and F. Hoffmann-La
Roche Ltd (“Roche”), has an up-front fee component and a running-royalty
component. The purchase price of this Bio-threat Agent Detection Kit (Part No.          
) includes limited, non-



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	transferable rights under the running-royalty
component to use only this amount of that product to practice the Polymerase
Chain Reaction (“PCR”) and related processes described in said patents solely
for bio-threat agent environmental detection and research activities of the
purchaser when this product is used in conjunction with a thermal cycler whose
use is covered by the up-front fee component. Rights to the up-front fee
component must be obtained by the end user in order to have a complete license.
These rights under the up-front fee component may be purchased from Applied
Biosystems or obtained by purchasing an Authorized Thermal Cycler. The right to
use this product to perform and to offer commercial services for bio-threat
agent environmental detection applications, using PCR, including reporting
results of purchaser’s activities for a fee or other commercial consideration,
is also granted with the purchase of said product. Further information on
purchasing licenses to practice the PCR process may be obtained by contacting
the Director of Licensing at Applied Biosystems, 850 Lincoln Centre Drive,
Foster City, California 94404 or at Roche Molecular Systems, Inc.,1145 Atlantic
Avenue, Alameda, California 94501.



Product literature or other documents may state that the Cepheid GeneXpert
Module is an authorized thermal cycler within the meaning of the foregoing
label license, as long as such statement is true.


6.4   Royalty Payments to Roche, ABI, and Third Parties.



	 	 	6.4.1   Roche Royalties. Payment of any and all royalty payments due to
Roche on account of the manufacture and sale of Products pursuant to this
Agreement will be the responsibility of ABI. [***] the royalty to be paid
to Roche by ABI is[***]
	 
	 	 	6.4.2   ABI Royalties. Cepheid will be responsible for maintaining its
Thermal Cycler Supplier Agreement (“TCSUP”) in good standing through
prompt payment of all royalties due as well as compliance with other
provisions of the TCSUP. [***]
	 
	 	 	6.4.3   Royalties Due Other Third Parties. If either Party believes that
a license or other right is required from a Third Party, or that the
payment of royalties or other consideration is required to be made to, a
Third Party, to obtain Intellectual Property Rights to manufacture, sell
or import Products, such Party shall notify the other Party. The matter
will be presented to the Joint Steering Committee for consideration, and
the Parties shall confer with respect to the matter to seek to agree as
to whether any such rights are required and, if they agree that they are,
how to obtain such rights. However, if the Parties do not agree, either
Party may seek to obtain such rights on such terms and conditions as such
Party in its sole discretion deems necessary and appropriate. The Party
seeking to obtain such rights shall keep the other Party reasonably
informed on a concurrent basis of the status of discussions and
negotiation with the Third Party, will accurately respond to questions
regarding such negotiations and their status, will counsel with and seek
the advice of the other Party with respect to such negotiations, and will
promptly furnish such other Party with copies of all material written
(including electronic) communications with the Third Party, with copies
of all drafts of agreements or other documents setting forth commitments
or proposed commitments, and a copy of any



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	 	 	executed agreement set forth
the terms for the obtaining of any such rights, and all documents setting
forth related agreements, commitments or understandings. The Party that
did not enter into such agreement will reimburse the other Party [***] of
any net amounts paid to such Third Party to obtain such rights within
forty five (45) days after receipt of an invoice therefor. If such
agreement affords rights other than solely rights to manufacture and/or
sell Products subject to and pursuant to this Agreement, the reimbursing
Party shall only be required to reimburse the other [***] [***]of the
fair market value, determined as of the effective date of such agreement
with the Third Party, of the proportionate value that the rights granted
to manufacture and/or sell Products subject to and pursuant to this
Agreement bear to the totality of rights granted pursuant to such
agreement with the Third Party. Notwithstanding the foregoing, if such
rights are sought to be obtained from an Affiliate of a Party, no such
agreement will be entered into with such Affiliate without the written
consent of both Parties. Neither the royalties or other amounts paid by
the Party entering into such Agreement with the Third Party to obtain
such rights, nor the amounts paid by the other Party to reimburse such
Party[***], shall be. Notwithstanding the foregoing, however, if the
license or other rights obtained are rights as to which one Party has
indemnified the other pursuant to Section 11.4.1 or 11.5.1, then each
Party shall only be required to reimburse the other Party [***]of such
payment out of [***]received by the reimbursing Party. For the purposes
of clarity, it is understood and agreed that neither Party shall be
required to reimburse the other Party for any amounts except amounts paid
to obtain any such rights with respect to Products sold pursuant to this
Agreement. In particular, and without limiting the generality of the
foregoing, neither Party shall be required under this Section 6.4.3 to
reimburse the other party for punitive, multiple or similar damages, or
costs of defending any action or proceeding.



6.5   No Express or Implied License. It is expressly understood and agreed that
nothing contained in this Agreement, the Cartridge Packing Agreement or the
Distribution Agreement shall be deemed to grant to Cepheid a right or license
to manufacture ABI PCR Materials or to practice any claims of the PCR Rights.
The foregoing shall not be deemed to limit Cepheid’s rights to properly use
properly labeled Materials as an end user, or Cepheid’s rights under its TCSUP
with ABI.


7.     Exclusivity, No Implied Licenses, Sales, Value Sharing


7.1   Exclusivity. During the term of this Agreement, neither Party nor its
Affiliates directly or indirectly will market, sell, or distribute any Products
containing ABI PCR Materials, or Products the manufacture, sale or use of which
would require PCR Rights, to the USPS or for use by or for the benefit of the
USPS for the detection of anthrax or other bio-threat agents that the Parties
have agreed in writing are intended to be detected by Products except in
accordance with the terms and conditions of this Agreement.


7.2   No Implied Licenses. No license or other right is granted or is to be
construed as being granted hereunder by one Party to the other Party, whether
express, implied, or by estoppel, to any Intellectual Property Rights, or to
trademark, trade dress, or service mark rights, or any other intellectual
property rights, owned, used, licensed to, or otherwise controlled by, a Party,
except solely for the purposes of manufacturing and selling Products to or for
the use of the USPS as expressly set forth in this Agreement.


7.3   Sales of Products; Approval of Sales Agreement. Cepheid shall be
responsible for sales of Bio-Threat Agent Detection Systems, including as a
distributor of Products purchased from ABI, to the USPS, either directly or
through Northrop-Grumman or another Third Party selected by Cepheid. Cepheid
will use commercially reasonable efforts to execute a sales agreement covering
the sales of Products to or for the use of the USPS (that is, an agreement
covering Products but not GeneXpert Modules, which Cepheid will seek to make
the subject of a separate agreement). [***] Cepheid shall not under any
circumstances enter into any agreement with the


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USPS or any Third Party or any
other party, and any amendment of any such agreement entered into, for the sale
or other distribution of Products without the express written consent of ABI.
Cepheid will use its reasonable best efforts to cause any such agreement to
name ABI as a named third-party beneficiary under the Agreement. Cepheid shall
deliver copies of drafts of any proposed agreement covering Products to ABI for
review and comment, and shall deliver to ABI, at least [***]before execution
thereof by the parties thereto, or such shorter time to which ABI may agree,
the final proposed form of such Agreement. [***]Cepheid shall promptly notify
ABI of any claim of breach of such agreement by the USPS, Northrop Grumman, or
the Thirty Party thereto, and promptly furnish to ABI copies of any writing
notifying Cepheid of or relating to any such breach. Any sales agreement shall
provide that Cepheid be informed of the price of Products to the USPS, the
end-user, so that Cepheid may inform ABI, as ABI’s royalty to Roche is based on
such price.


7.4   Sales Forecasts. In its role as distributor of Products to the USPS,
Cepheid shall immediately prior to the beginning of each Quarter provide to ABI
a rolling forecast of projected sales for each of four quarters into the
future. These forecasts will be based on reasonable commercial efforts by
Cepheid to estimate future sales, and will be updated at the beginning of each
month for the current quarter.


7.5.   Pricing. The price for Products to the USPS, or Northrop-Grumman or other
Third Party, as the case may be, shall be determined by Cepheid in its sole
discretion. If Products are sold together with GeneXpert Modules, or as part
of Bio-Threat Agent Detection Systems, the price paid for Products to be used
in the determination of Net Sales shall be deemed to be the higher of any price
for the Products that is separately stated in connection with the sale,
Cepheid’s then retail list price for the Products sold, or the Net Sales amount
received for the sale less the deemed price of the GeneXpert Modules sold, with
such deemed price being the higher of Cepheid’s retail list price therefor or
the average price paid for the then most recent five GeneXpert Modules sold as
independent units.


7.6   Value Sharing. Payment to ABI of [***]Promotional Products. Each Party
shall be entitled to [***]realized upon the sale of Products. It is understood
and agreed that ABI will appoint Cepheid as its distributor of Products to the
USPS, or to a Third Party for resale to and use by the USPS, pursuant to the
terms of the Distributor Agreement. Accordingly, the Parties agree that to
administer the above value sharing agreement, [***]It is understood and agreed
that Cepheid may distribute products for no or for de-minimus consideration for
promotional or testing purposes. Cepheid agrees that the amount of Products
distributed for such purposes in any twelve (12) months period shall not exceed
one percent (1%) of the aggregate number of Products sold for more than
de-minimus consideration during such twelve (12) month period, unless ABI
otherwise agrees. It is also understood and agreed that certain Products or
parts thereof may be furnished to the USPS or its designees for validation
purposes, with or without consideration, and nothing in this Section 7.6 shall
be deemed to restrict Cepheid from providing a reasonable amount or number of
Products or parts thereof for such purposes.


7.7   Cap on Manufacturing Cost. Notwithstanding anything contained in this
Agreement to the contrary, for the purposes of [***]The Parties understand and
agree that the initial Cartridge for the anthrax assay is capable of
effectively performing one assay for one bio-threat agent, namely, anthrax.
[***]If the Joint Steering Committee fails to agree on [***]shall be deemed a
dispute and the matter shall be determined by arbitration as set forth in
Exhibit 13,18. [***]


7.8   Reimbursement and Payment Process. Prior to the shipment of any
revenue-generating Products, and on or about each anniversary thereafter on a
date set by the Joint Steering Committee, and at any time there is a
significant change in a Product being shipped, each Party will make a good
faith estimate of [***] Within thirty (30) days after the end of each Quarter,
Cepheid will submit to ABI a written itemized accounting and report of Products
sales, Manufacturing Costs and royalties paid containing such information as
ABI may reasonably request from time to time, but at a minimum setting forth
the number and types of Products sold


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during the Quarter, the net amount billed
therefor, the revenue received, [***]Based on that report, Cepheid will
calculate the actual amount due to each Party and depending on the results
either pay any balance due to ABI within forty five (45) days after the end of
the Quarter, or issue an invoice to ABI for moneys due, which invoice ABI shall
pay within thirty (30) days of receipt.


7.9   Books and Records; Audit. Using a Party’s customary practices and
procedures in accordance with GAAP, each Party will keep and maintain proper
and complete records and books of account sufficient in detail to enable the
verification of monies spent and received by each Party, and Manufacturing Cost
of and subject royalties paid by each Party, in connection with each Party’s
obligations under this Agreement. The books and records will be retained for a
period of at least 6 years after the end of the period for which such books and
records pertain. Each Party will have the right from time to time (not to
exceed once per calendar year) during normal business hours and upon 2 weeks
prior written notice, to inspect in confidence, or have an agent, accountant or
other representative inspect in confidence, such books and records of the other
Party. The Party initiating the inspection will bear the costs thereof unless
the inspection reveals a discrepancy unfavorable to that Party of at least 10%,
in which case the other Party will pay the costs of the inspection. If the
inspection results in a final determination that amounts have been overstated
or understated, the applicable amount will be refunded or paid promptly by the
appropriate Party. The inspecting Party will treat all information learned in
the course of any audit or inspection as Confidential Information, and will
maintain such Confidential Information in strict confidence, except to the
extent necessary for the Party to reveal such information in order to enforce
its rights under this Agreement or if disclosure is required by law. Any
public accounting firm shall sign a customary confidentiality agreement as a
condition precedent to their inspection, and shall report to the inspecting
Party only its conclusion with such other information at the firm deems
necessary by way of explanation.


8.     Confidentiality


8.1   Non-Disclosure; Non-Use. Because Cepheid and ABI will be cooperating with
each other under this Agreement, each may reveal Confidential Information to
the other. The Parties agree, by using the same degree of care as each uses
for its own information of like importance, but not less than a reasonable
degree of care, to hold in confidence any Confidential Information disclosed by
the other Party hereunder, and not to disclose any Confidential Information of
the other Party to any Third Party or, except as provided below, to any
Affiliate, and not to use any Confidential Information disclosed by the other
Party hereunder for any purpose other than carrying out its obligations under
this Agreement (including, without limitation, furthering the Joint Development
Program and this Collaboration), without the express written consent of the
other Party. Each Party will disclose Confidential Information only to its
employees or agents who have a need to know same for such purpose. With
respect to any Confidential Information that is revealed by a Party to the
other Party, the confidentiality and non-use requirements of this Section 8
will remain in force for a period of 5 years following the date the
Confidential Information is disclosed, or 2 years after the expiration or
termination of this Agreement, whichever is later.


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


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


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8.4   Bankruptcy. All Confidential Information disclosed by one Party to the
other will remain the intellectual property of the disclosing Party. A
bankrupt or insolvent Party will, to the extent permitted by law, take all
steps necessary or desirable to maintain the confidentiality of the other
Party’s Confidential Information and to ensure that any court or other tribunal
maintain such information in confidence in accordance with the terms of this
Agreement. In the event that a court or other legal or administrative tribunal,
directly or through an appointed master, trustee or receiver, assumes partial
or complete control over the assets of a Party based on the insolvency or
bankruptcy of such Party, the bankrupt or insolvent Party will promptly notify
the court or other tribunal



	 	 	8.4.1   that Confidential Information received from the other Party under
this Agreement remains the property of the other Party; and,
	 
	 	 	8.4.2   of the confidentiality and non use obligations under this
Agreement.



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


8.6   Compliance with Statutory Requirements. Nothing in this Agreement will be
construed as preventing or in any way inhibiting either Party from complying
with statutory or regulatory requirements governing the development,
manufacture, use, sale, or other distribution, of Products in any manner that
it reasonably deems appropriate, including, for example, by disclosing to
regulatory authorities Confidential Information or other information received
from a Party or Third Parties. However, the Parties will take reasonable
measures to assure that no unauthorized use or disclosure is made by persons or
entities to whom access to such information is granted under this Section 8.6.


8.7   Non-Solicitation. During the term of the Agreement, and for a period of
one (1) year thereafter, a Party will not solicit any person who is employed by
or is an exclusive consultant to the other Party and directly involved with the
Joint Development Program or this Collaboration to terminate that person’s
employment by or consultancy to the other Party. As used herein, the term
“solicit” will mean requesting, directly or indirectly, any employee or
consultant to terminate his employment by or consultancy to a Party.


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


9.     Term and Termination


9.1   Term. Unless terminated earlier as provided in this Section 9, this
Agreement will commence on the Effective Date and will remain in full force and
effect until the later of fifteen


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years from the Effective Date or the last to
expire of the PCR Rights or any other issued patent owned or licensed to ABI or
Cepheid that would be infringed by the manufacture, sale or importation of
Products.


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	9.2	 	 Termination.




	 	 	9.2.1   This Agreement may be terminated without cause by mutual written
agreement of the Parties, effective as of the time specified in such
written agreement.
	 
	 	 	9.2.2   This Agreement may be terminated by either Party on or after
[***]upon [***]written notice to the other Party if an agreement for the
supply of Products to or for the use of the USPS has not been executed by
Cepheid [***]provided, however, that if such agreement has not been
executed by such date but negotiations therefor are continuing, either
Party by written notice to the other given on or before [***]may defer
the date by which such agreement must be signed to a date specified in
such notice, but which date [***]. Any notice of termination pursuant to
this Section 9.2.2 shall expressly state that it is a notice of
termination given pursuant to Section 9.2.2 of this Agreement.
	 
	 	 	9.2.3   This Agreement may be terminated by either Party, in the event the
other Party files in any court or agency under any statute or regulation
of any state or country, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of the
other Party or of its assets, or if the other Party proposes a written
agreement of composition or extension of its debts, or if the other Party
will be served with an involuntary petition against it, filed in any
insolvency proceeding, and the petition is not stayed or dismissed within
60 days after the filing thereof, or if the other Party will propose or
be a Party to any dissolution or liquidation, or if the other Party will
make an assignment for the benefit of creditors; or
	 
	 	 	9.2.4   This Agreement may be terminated by either Party upon any material
breach of this Agreement by the other Party; except that the Party
alleging such breach must first give the other Party written notice
thereof, which notice must state the nature of the breach in reasonable
detail and the other Party must have failed to cure such alleged breach
within 60 days after receipt of the notice; and the Party alleging the
breach must terminate this Agreement by written notice to the other Party
given within 150 days of first giving the other Party such written
notice.
	 
	 	 	9.2.5   This Agreement may be terminated by either Party any time after
[***]written notice to the other Party if the Cartridge Packing Agreement
and the Distributor Agreement have not both been executed and delivered
by the Parties on or before November 30, 2002. Any notice of termination
pursuant to this Section 9.2.5 shall expressly state that it is a notice
of termination given pursuant to Section 9.2.5 of this Agreement. The
Parties agree to use their respective reasonable best efforts to complete
negotiation of and to execute and deliver such agreements prior to
November 30, 2002.
	 
	 	 	9.2.6   [***]




	9.3	 	 Survival of Obligations and Certain Rights. Upon any termination of this
Agreement, by expiration of the term or otherwise, neither Party will be
relieved of any obligations incurred prior to such termination. Despite
any termination of this Agreement, the obligations of the Parties under
Sections 2 (to extent that a definition is required to interpret an
operative Section of this Agreement) 5, 6 (with respect to the performance
by the Parties of post termination obligations) and 7.2, Sections 7.6, 7.7
and 7.8 with respect to the performance by the Parties of post termination
obligations, Sections 7.9, 8, 9.3, 10, 11, 12 (to the extent of post
termination obligations), 13.3, 13.4, 13.5, 13.7, 13.8, 13.9, 13.10,
13.11, 13.12, 13.15, 13.16, 13.17 and 13.18, and, to the extent
applicable, the Exhibits to this Agreement, as well as any other
provisions that by their nature are intended to survive any termination,
will survive and continue to be enforceable. In addition, no termination
of this Agreement for whatever reason, for cause or without cause, shall
relieve (i) ABI of its obligation to fill orders for Materials placed by
Cepheid



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	 	 	prior to the effective date ABI received or delivered the notice
of termination, as the case may be, or in order to fulfill commitments
binding on Cepheid as of the date ABI received or delivered the notice of
termination, as the case may be, (ii) Cepheid of its obligation to pay for
Materials delivered in fulfillment of such orders or for Materials
previously delivered but not paid for, and to pay ABI its share of
Residual Revenues, and (iii) either Party from fulfilling obligations to
Third Parties, including without limitation warranty obligations, incurred
prior to the date of termination or relating to Products ordered prior to
the date of termination. In addition, Cepheid may sell all Products in
inventory, and complete manufacture of and sell all Products the
manufacture of which was commenced on or before the date of receipt or
delivery, as the case may be, of the notice of termination, not used to
fulfill any such binding orders. All such obligations and all purchases
of Material and sales of Products pursuant to this Section 9.3 shall be
processed and performed pursuant to and in accordance with the terms of
this Agreement. Notwithstanding any termination of this Agreement,
Cepheid may continue to use marketing and sales materials that include ABI
trademarks or tradenames until the earlier of such times as supplies
thereof are exhausted or six (6) months from the date of termination.
However, Cepheid shall not prepare new sales or marketing materials that
include Materials obtained from ABI Products or ABI trademarks or
tradenames after the date of termination, except to the extent reasonably
deemed necessary for Cepheid to implement its rights set forth in this
Section 9.3.
	 
	10	 	 Representations, Warranties and Covenants; Disclaimers
	 
	10.1	 	Representations and Warranties. Each Party represents, warrants and
covenants to the other Party that:




	 	 	10.1.1   It has the corporate power and authority and legal right to enter
into this Agreement and to perform its obligations hereunder;
	 
	 	 	10.1.2   the execution and delivery of this Agreement and the performance
of the transactions contemplated thereby have been duly authorized by all
necessary corporate action of the Party;
	 
	 	 	10.1.3   the execution and delivery of this Agreement and the performance
by the Party of any of its obligations under this Agreement do not and
will not: conflict with, or constitute a breach or violation of, any
other contractual obligation to which it is a party, any judgment of any
court or governmental body applicable to the Party or its properties, or,
to the Party’s knowledge, any statute, decree, order, rule or regulation
of any court or governmental agency or body applicable to the Party or
its properties, or require any consent or approval of any governmental
authority or other person;
	 
	 	 	10.1.4   each Party will, to the best of its knowledge without undertaking
a special investigation, disclose to the other Party any material adverse
proceedings, claims or actions that arise that would materially interfere
with that Party’s performance of its obligations under this Agreement;
and
	 
	 	 	10.1.5   each Party’s employees have executed or, within five days after
the Effective Date or upon commencing employment with such Party, will
execute agreements, whereby all right, title and interest in any
Intellectual Property Rights are assigned to their respective employer.



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




	 	 	10.2.1   A WARRANTY OR REPRESENTATION BY EITHER PARTY AS TO THE VALIDITY,
ENFORCEABILITY, OR SCOPE OF ANY PATENT;
	 
	 	 	10.2.2   A WARRANTY OR REPRESENTATION THAT ANY MANUFACTURE, SALE, OFFER FOR
SALE, LEASE, IMPORT, USE OR OTHER DISPOSITION OF ANY PRODUCTS OR SERVICES
HEREUNDER WILL BE FREE FROM INFRINGEMENT OF PATENT, COPYRIGHT OR OTHER
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES;
	 
	 	 	10.2.3   A WARRANTY OR REPRESENTATION BY EITHER PARTY WITH RESPECT TO THEIR
ENFORCEMENT OF ANY PATENT INCLUDING WITHOUT LIMITATION THE PROSECUTION,
DEFENSE OR CONDUCT OF ANY ACTION OR SUIT CONCERNING INFRINGEMENT OF ANY
SUCH PATENT;
	 
	 	 	10.2.4   CONFERRING ANY RIGHT TO USE IN ADVERTISING, PUBLICITY, OR
OTHERWISE, ANY TRADEMARK, TRADE NAME OR NAMES, OR ANY CONTRACTION,
ABBREVIATION OR SIMULATION THEREOF, OF EITHER PARTY;
	 
	 	 	10.2.5   AN OBLIGATION UPON EITHER PARTY TO MAKE ANY DETERMINATION AS TO
THE APPLICABILITY OF ANY OF ITS PATENTS TO ANY PRODUCT OR SERVICE;
	 
	 	 	10.2.6   AN INDUCEMENT BY ONE PARTY TO THE OTHER TO USE ANY PATENTS OR TO
MAKE, USE, OR SELL PRODUCTS COVERED BY ANY PATENTS, OR AN INDUCEMENT OF
THE OTHER PARTY’S CUSTOMERS TO PURCHASE OR OTHERWISE USE PRODUCTS COVERED
BY ANY PATENTS;
	 
	 	 	10.2.7   AN ADMISSION BY EITHER PARTY THAT ANY OF ITS PRODUCTS INFRINGE ANY
PATENTS OF THE OTHER PARTY; OR
	 
	 	 	10.2.8   A WARRANTY OR REPRESENTATION BY EITHER PARTY WITH RESPECT TO THE
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OF ANY PRODUCTS OR
SERVICES HEREUNDER.




	11	 	Indemnification; Limitation of Liability



11.1   General Statement Regarding Indemnity. For purposes of clarification, it
is noted that the Parties intend that Sections 11.2 and 11.3 of this Agreement
set forth the Parties indemnification agreements other than those relating to
intellectual property, that Sections 11.4, 11.5 and 11.6 set forth the Parties
indemnification agreements relating to intellectual property, and that the
indemnifications set forth below are intended to be afforded notwithstanding
any warranty limitations set forth in Section 10.


11.2   Cepheid’s General Indemnity. In supplement of and in addition to any
indemnity given by Cepheid to ABI in the Cartridge Packing Agreement, subject
to the limitations set forth below in this Section 11, and excluding claims as
to which ABI indemnifies Cepheid pursuant to Section 11.3, Cepheid will defend,
indemnify and hold harmless ABI and its Affiliates against any and all claims
made by, or judgment, damage, liability, loss, cost or other expense, including
reasonable legal fees and expenses (collectively, “Liability”), resulting from
any claims made by or proceedings brought by, any Third Party or Affiliate of
Cepheid against ABI or any of ABI’s Affiliates to the extent that the claim or
Liability arises from the following:



	 	 	11.2.1   Cepheid’ negligence or willful misconduct, or the negligence or
willful misconduct of any manufacturer engaged by Cepheid for the packing
or manufacture of Products, or



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	 	 	the storage, handling or distribution of
Products by Cepheid or its agents or distributors, or the sale of
Products or Bio-Threat Agent Detection Systems, or the possession or use
of Products or Bio-Threat Agent Testing Systems by Cepheid, its
Affiliates or any Third Party (including without limitation the USPS),
except to the extent caused by the negligence or willful misconduct of
ABI; or
	 
	 	 	11.2.2   Cepheid’s breach of this Agreement, including without limitation
any warranty of Cepheid set forth in Section 10.



11.3   ABI’ General Indemnity. In supplement of and in addition to any
indemnity given by ABI to Cepheid in the Cartridge Packing Agreement, subject
to the limitations set forth below in this Section 11, ABI will defend,
indemnify and hold harmless Cepheid against any claim made by, or Liability
resulting from any and all claims made by or proceedings brought by, any Third
Party or Affiliate of ABI against Cepheid or any of Cepheid’s Affiliates to the
extent that the claim or Liability arises from the following:



	 	 	11.3.1   ABI’s negligence or willful misconduct, or the negligence or
willful misconduct of any manufacturer engaged by ABI except Cepheid, in
the manufacture of Materials that are actually manufactured or sourced by
ABI and are furnished to Cepheid by ABI (excluding specifically, without
limitation, any Materials obtained by ABI from Trilinx or any other Third
Party supplier of Materials), or the storage, handling or distribution of
Materials by ABI or its agents or distributors; or,
	 
	 	 	11.3.2   ABI’s breach of this Agreement, including without limitation any
warranty of ABI set forth in Section 10.



11.4  ABI Intellectual Property Release and Indemnity.



	 	 	11.4.1   Subject to the restrictions set forth in this Section 11.4 and
Section 11.7, and provided the Released Parties (as defined below) comply
with their obligations in Section 11.4.2, ABI agrees, for itself and its
Affiliates, to defend Cepheid and its Affiliates, and ETG or Northrop
Grumman if either of them act and ETG and Northrop Grumman if both of
them act to purchase and resell Products to the USPS (individually, a
“Released Party,” collectively “Released Parties”) from any claim, demand
or cause of action in, and to indemnify and hold harmless the Released
Parties from and against any Liabilities resulting from, any legal action
or proceeding brought by a Third Party against a Released Party to the
extent that such action or proceeding is based on a claim that (i) [***]
	 


	 	 	11.4.2   Released Parties’ Obligations. A Released Party must notify ABI in
writing of any claim for which it may seek defense and indemnity from ABI
hereunder promptly after becoming aware of such claim, and shall
cooperate with and provide all reasonable assistance to ABI, at ABI’s
expense, in the defense or settlement of such claim. Subject to Section
11.9, ABI shall have sole authority to defend and/or settle any claim
under this Section 11.4
	 
	 	 	11.4.3   Remedy for Infringement, Rights of ABI, Exceptions. If any Product
or any portion thereof is subject to a suit or other legal proceeding
claiming that the Product or such portion infringes a Third Party’s
Intellectual Property Right that ABI indemnifies the Released Parties for
under Section 11.4.1, or in ABI’s opinion is (are) likely to become
subject of such a claim, ABI shall, at its option, have the right to
either: (a) procure for the Released Party the right to continue using
the Product or such portion; or (b) replace or modify the Product or such
portion so that it becomes non-infringing; or (c) substitute for the
infringing Product or such portion other suitable, non-infringing
products. ABI shall have no liability or obligation hereunder for any
infringement based upon: the use of Product in combination with any
product not provided by ABI or intended for use with



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	 	 	Product except as
contemplated by this Agreement, or based upon any modification to Product
made by the Released Party or its Affiliates or a Third Party except as
contemplated by this Agreement, if such claim would not have occurred but
for such combination or modification.
	 
	 	 	11.4.4   Exclusive Intellectual Property Liability of ABI. THE FOREGOING
STATES THE ENTIRE LIABILITY OF ABI, AND THE EXCLUSIVE REMEDY OF THE
RELEASED PARTIES, FOR ANY INFRINGEMENT OR CLAIMED INFRINGEMENT OF PATENT,
COPYRIGHT, TRADE SECRET OR ANY OTHER INTELLECTUAL PROPERTY RIGHT EXCEPT
AS MAY BE OTHERWISE EXPRESSLY SET FORTH IN SECTION 11.6A AND 11.6B.




	11.5	 	Cepheid Intellectual Property Release and Indemnity.




	 	 	11.5.1   Subject to the restrictions set forth in this Article 11.5 and
Section 11.7, and provided the Cepheid Released Parties (as defined
below) comply with their obligations in Section 11.5.2, Cepheid agrees,
for itself and its Affiliates, to defend ABI and its Affiliates, and ETG
or Northrop Grumman if either of them act and ETG and Northrop Grumman if
both of them act to purchase and resell Products to the USPS
(individually, a “Cepheid Released Party,” collectively, the “Cepheid
Released Parties”) from any claim, demand or cause of action in, and to
indemnify and hold harmless the Cepheid Released Parties from and against
any Liabilities resulting from, any legal action or proceeding brought by
a Third Party against a Cepheid Released Party to the extent that such
action or proceeding is based on a claim that [***]
	 
	 	 	11.5.2   Released Parties’ Obligations. A Cepheid Released Party must
notify Cepheid in writing of any claim for which it may seek defense and
indemnity from Cepheid hereunder promptly after becoming aware of such
claim, and shall cooperate with and provide all reasonable assistance to
Cepheid, at Cepheid’s expense, in the defense or settlement of such
claim. Subject to Section 11.9, Cepheid shall have sole authority to
defend and/or settle any claim under this Section 11.5.
	 
	 	 	11.5.3   Remedy for Infringement, Rights of Cepheid, Exceptions. If any
Product or any portion thereof is subject to a suit or other legal
proceeding claiming that the Product infringes a Third Party’s
Intellectual Property Right that Cepheid indemnifies the Cepheid Released
Parties for under Section 11.5.1, or in Cepheid’s opinion is (are) likely
to become subject of such a claim, Cepheid shall, at its option, have the
right to either: (a) procure for the Cepheid Released Party the right to
continue using the Product; or (b) replace or modify the Product so that
it becomes non-infringing; or (c) substitute for the infringing Product
other suitable, non-infringing products. Cepheid shall have no liability
or obligation hereunder for any infringement based upon: the use of
Product in combination with any product not provided by Cepheid or
intended for use with Product, except as contemplated by this Agreement,
or based upon any modification to Product made by the Cepheid Released
Party or its Affiliates or a Third Party except as contemplated by this
Agreement, if such claim would not have occurred but for such combination
or modification.
	 
	 	 	11.5.4   Exclusive Intellectual Property Liability of Cepheid. THE
FOREGOING STATES THE ENTIRE LIABILITY OF CEPHEID, AND THE EXCLUSIVE
REMEDY OF THE CEPHEID RELEASED PARTIES, FOR ANY INFRINGEMENT OR CLAIMED
INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR ANY OTHER INTELLECTUAL
PROPERTY RIGHT, EXCEPT AS MAY BE OTHERWISE EXPRESSLY SET FORTH IN SECTION
11.6A AND 11.6B.



11.6A Shared ABI — Cepheid Intellectual Property Indemnity.


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Subject to the restrictions set forth in this Article 11.6A, each of ABI and
Cepheid agrees, for itself and its respective Affiliates, to defend the other
Party and its Affiliates, and ETG or Northrop Grumman if either of them act and
ETG and Northrop Grumman if both of them act, to purchase and resell Products
to the USPS (individually, a “Shared Released Party,” collectively, the “Shared
Released Parties”), [***]from any claim, demand or cause of action in, and to
indemnify and hold harmless the Shared Released Parties from and against any
Liabilities resulting from, any legal action or proceeding brought by a Third
Party against a Shared Released Party to the extent that such action or
proceeding is based on a claim that (i) the manufacture or sale by Cepheid of
Other Chemical Materials pursuant to this Agreement for Authorized Use by the
USPS in the Bio-Threat Detection System infringes [***]), (ii) The procedures
set forth in Section 5.4.1 shall govern the obligations of the Parties for
claims covered by this Section 11.6A.


11.6B.   [***]


11.7   Effect of Uncured Breach on Indemnification Obligations. Notwithstanding
the foregoing, neither Party shall be obligated to indemnify the other Party
under this Section 11 in the event that the Party seeking indemnification shall
have committed a material breach of this Agreement, and the Party from whom
indemnification hereunder is sought gives the breaching Party notice of such
breach and an opportunity to cure such material breach within 60 days pursuant
to Section 9.2.4, and such material breach remains uncured upon the expiration
of such period.


11.8   Notice; Choice of Attorney. A Party that intends to claim indemnification
under this Section 11 (the “Indemnitee”) will promptly notify the other Party
(the “Indemnitor”) of any Liability in respect of which the Indemnitee intends
to claim indemnification. The Indemnitor, after it determines that
indemnification is required of it, will assume the defense and settlement
thereof with counsel of its choice, reasonably satisfactory to the other Party.
An Indemnitee will have the right to retain its own counsel, with the
reasonable fees and expenses to be paid by the Indemnitor if Indemnitor does
not assume the defense or if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other Party represented by
counsel. The Indemnitee’s failure to deliver notice to the Indemnitor within a
reasonable time after the commencement of any such action, if prejudicial to
Indemnitor’s ability to defend the action, will relieve the Indemnitor of any
liability to the Indemnitee under this Section 11, but the omission to deliver
notice to the Indemnitor will not relieve it of any liability that it may have
to any Indemnitee otherwise than under this Section 11.


11.9   Consent Required. The indemnity provisions in this Section 11 will not
apply to amounts paid in settlement of any Liability if the settlement is
effected without the consent of the Indemnitor. In addition, neither Party
shall enter into any settlement or otherwise resolve any infringement matter in
a manner that would adversely impact the business of the other Party or in any
manner limit the other Party’s rights without such Party’s prior written
consent.


11.10   Cooperation. The Indemnitee under this Section 11, its employees and
agents, will cooperate fully with the Indemnitor and its legal representatives
in the investigations of any action, claim or liability covered by this
indemnification. In the event that each Party claims indemnity from the other
and one Party is finally held liable to indemnify the other, the Indemnitor
will additionally be liable to pay the reasonable legal costs and attorneys’
fees incurred by the Indemnitee in establishing its claim for indemnity.


11.11   LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL CEPHEID OR APPLIED BIOSYSTEMS BE
LIABLE TO THE OTHER, WHETHER IN CONTRACT, TORT, WARRANTY, OR UNDER ANY STATUTE
(INCLUDING WITHOUT LIMITATION ANY TRADE PRACTICE, UNFAIR COMPETITION OR OTHER
STATUTE OF SIMILAR IMPORT) OR ON ANY OTHER BASIS, FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, DAMAGES OF THE


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OTHER, OR FOR MULTIPLE OR PUNITIVE
DAMAGES, WHETHER OR NOT FORESEEABLE AND WHETHER OR NOT THE OTHER IS ADVISED OF
THE POSSIBILITY OF DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES
ARISING FROM OR RELATED TO LOSS OF USE, LOSS OF DATA, FAILURE OR INTERRUPTION
IN THE OPERATION OF ANY EQUIPMENT, DELAY IN REPAIR OR REPLACEMENT, OR LOSS OF
OPPORTUNITY OR GOODWILL. THE PARTIES AGREE THAT THE DAMAGES INDEMNIFIED UNDER
SECTION 11.4, 11.5 AND 11.6A SHALL NOT BE DEEMED INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR SPECIAL DAMAGES, OR MULTIPLE OR PUNITIVE DAMAGES.


12     Insurance


12.1   Cepheid shall maintain during the term of this Agreement and three (3)
years thereafter: (i) Worker’s Compensation insurance as prescribed by law,
(ii) employer’s liability insurance with limits of at least $1 million each
occurrence, and (iii) comprehensive automobile liability insurance with limits
of at least $3 million for bodily injury and property damage for each
occurrence, (iv) Comprehensive General Liability (“CGL”) insurance, including
Blanket Contractual Liability, and Broad Form Property Damage, with limits of
at least $3 million combined single limit for personal injury and property
damage for each occurrence and (v), CGL insurance endorsed to include products
liability and completed operations coverage of at least $5 million for each
occurrence. All CGL insurance shall designate Applera Corporation (the parent
company of ABI) and its subsidiaries, and each of their officers, directors and
employees, as additional insureds. Cepheid shall furnish ABI with certificates
evidencing such insurance promptly after the execution of this Agreement, and
from time to time at the request of ABI. Such certificates shall provide for
not less than thirty (30) days prior written notice to ABI in the event of
cancellation, material change or intent not to renew. Cepheid agrees that it,
and its insurer(s) and anyone claiming by, through, under or in Cepheid’
behalf, shall have no claim, right of action or right of subrogation against
ABI or its customers, distributors or agents based on any loss or liability
insured against under the foregoing insurance or other insurance Cepheid may
hold.


12.2   ABI shall maintain during the term of this Agreement and three (3) years
thereafter insurance of the type and with limits at least as high as those set
forth in Section 12.1. All CGL insurance shall designate Cepheid and its
subsidiaries, and each of their officers, directors and employees, as
additional insureds. ABI shall furnish Cepheid with certificates evidencing
such insurance promptly after the execution of this Agreement, and from time to
time at the request of Cepheid. Such certificates shall provide for not less
than thirty (30) days prior written notice to Cepheid in the event of
cancellation, material change or intent not to renew. ABI agrees that it, and
its insurer(s) and anyone claiming by, through, under or in Cepheid’ behalf,
shall have no claim, right of action or right of subrogation against Cepheid or
its customers, distributors or agents based on any loss or liability insured
against under the foregoing insurance or other insurance ABI may hold.


13.     General Provisions


13.1   Force Majeure. Except as may be herein otherwise specifically provided,
neither Party shall not be liable to the other for loss, injury, delay,
expenses, damages, or other casualty suffered or incurred by the other Party
due to a delay in performing or the failure to perform obligations hereunder as
result of trade disputes, strikes, riots, storms, earthquakes, fires, acts of
God or government or any cause (whether similar or dissimilar to the
foregoing), including but not limited to any shortages of power that is not
caused by the fault or inaction of the Party seeking to be excused from
performance, beyond the reasonable control of the Party seeking to be excused
from performance, provided, however, that such Party shall have given the other
Party prompt notice in writing of the occurrence of any such events or causes,
and of their discontinuance, and diligently seeks to perform at the earliest
reasonable opportunity; and further provided that this Section 13.1 shall not
apply to any obligation to pay money hereunder. If requested by either Party,
the Parties will discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable solution should
performance be materially delayed or


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prevented by events of force majeure as
set forth in this Section 13.1, but neither Party shall have an obligation to
amend this Agreement.


13.2   Publicity. Neither Party nor any of its Affiliates will originate any
news or any other public disclosure relating to this Agreement without the
prior written approval of the other Party. The Parties agree to issue a joint
press release as soon as feasible after the Effective Date, wherein the text of
such press release shall be mutually agreed to by the Parties.


13.3   Governing Law; Attorneys’ Fees. This Agreement will be deemed to have
been made in the State of California, and its form, execution, validity,
construction and effect will be determined exclusively in accordance with the
laws of the State of California, without reference to its conflicts of law
principles. Any suit arising out of or relating to this Agreement must be
brought and tried only in the State or Federal courts of California. In the
event that any Party shall commence any proceeding to enforce or interpret the
provisions of this Agreement, the prevailing Party in any such action or
proceeding will be entitled to recover reasonable attorneys’ fees and costs
incurred in connection with such suit, action or proceeding in addition to
whatever other remedies may also be available.


13.4   Severability. If a court or an arbitrator of competent jurisdiction holds
any provision of this Agreement to be illegal, unenforceable, or invalid, in
whole or in part for any reason, that provision will be deemed severed from the
rest of the Agreement, and the validity and enforceability of the remaining
provisions, or portions thereof, will not be affected.


13.5   Entire Agreement. This Agreement and any exhibits and schedules referred
to in this Agreement constitute the final, complete, and exclusive statement of
the terms of the agreement between the Parties pertaining to the subject matter
of this Agreement and supersede all prior and contemporaneous understandings or
agreements of the Parties as to such subject matter. No Party has been induced
to enter into this Agreement by, nor is any Party relying on, any
representation or warranty outside those expressly set forth in this Agreement.


13.6   Modification of Agreement. No terms or conditions of this Agreement will
be varied or modified by any prior or subsequent statement, conduct or act of
either of the Parties, except that the Parties may supplement, amend, or modify
this Agreement by written instruments specifically referring to, and executed
in the same manner as, this Agreement.


13.7   Assignment. Neither Party has the power to assign nor may assign this
Agreement nor any interest hereunder without the prior written consent of the
other Party, except that without obtaining the consent of the other Party
either Party may assign this Agreement or any of its rights or obligations to
(i) any Affiliate of such Party, (ii) any Third Party with which it may merge
or consolidate or who acquires more than fifty percent (50%) of its outstanding
voting securities, or (iii) provided the prior to the effective date of
assignment the prospective assignee agrees with the non-assigning Party in
writing to be subject to and bound by, and to perform, all of the assignor’s
obligations and covenants in this Agreement, to any Third Party to which it may
transfer all or substantially all of its assets and/or rights to which this
Agreement relates. Any unauthorized assignment will be void and of no force
and effect. Whether or not a Party consents to any transfer or assignment by
the other Party, no transfer or assignment of this Agreement shall relieve the
assignor from, and the assignor shall remain fully and primarily liable for,
the liabilities, obligations and covenants of the assignor under this
Agreement. Subject to the foregoing, the rights and liabilities of the Parties
will bind and inure to the benefit of their respective successors and assigns.


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


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13.9   Waiver. No waiver of a breach, failure of any condition, or any right or
remedy, contained in or granted by the provisions of this Agreement will be
effective unless it is in writing and signed by the Party waiving the breach,
failure, right or remedy. No waiver of any breach, failure, right or remedy
will be deemed a waiver of any other breach, failure, right or remedy, whether
or not similar, nor will any waiver constitute a continuing waiver unless the
writing so specifies.


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


13.11   Construction.



	 	 	13.12.1   Headings; Sections and Exhibits. Headings contained in this
Agreement are for convenience only and will not be used in the
interpretation of this Agreement. References herein to sections,
schedules and exhibits are to the sections, schedules and exhibits,
respectively, of this Agreement. The schedules and exhibits are hereby
incorporated herein by reference and made a part of this Agreement.
Should any inconsistency exist or arise between a provision of this
Agreement and a provision of any exhibit, schedule, or other incorporated
writing, the provision of this Agreement will prevail.
	 
	 	 	13.12.2   No Construction Against Drafter. Each Party and its counsel have
participated fully in the review and revision of this Agreement. Any rule
of construction to the effect that ambiguities are to be resolved against
the drafting Party will not apply in interpreting this Agreement.
	 
	 	 	13.12.3   Certain Words and Terms. Unless the context clearly requires
otherwise,




	 	(A)	 	the plural and singular numbers will each be deemed to include
the other;
	 
	 	(B)	 	the masculine, feminine, and neuter genders will each be
deemed to include the others;
	 
	 	(C)	 	“will,” “shall,” “will agree,” “shall agree,” or “agrees” are
mandatory, and “may” is permissive;
	 
	 	(D)	 	“or” is not exclusive; and
	 
	 	(E)	 	“includes” and “including” are not limiting.



13.12   Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart will be deemed an original instrument, but
all counterparts together will constitute but one agreement.


13.13   No Limitations on Business, Etc. Except as expressly set forth in this
Agreement, nothing in this Agreement shall be deemed to restrict either ABI’s
or Cepheid’s freedom and right to manufacture and sell products to whomever
they chose, or to engage others to do so or to contract with other
manufacturers and suppliers for the procurement of products of any kind or


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description, subject to obtaining required Intellectual Property Rights,
provided that Cepheid may not manufacture or sell Cartridges or other products
containing ABI PCR Materials except pursuant to this Agreement. Except as
otherwise provided in this Agreement, the Cartridge Packing Agreement, the
Distributor Agreement or other written agreement between the Parties, each
Party shall have absolute discretion in determining and conducting its
promotional, sales, marketing and distribution activities.


13.14   Counting Days. Unless otherwise specified, “days” will be considered
calendar days. Calendar days will be counted by excluding the first day and
including the last day, unless the last day is a Saturday, Sunday, or a legal
holiday recognized in the State of California and then it will be excluded.
“Business days” will exclude Saturdays, Sundays, and all legal holidays
recognized in the State of California.


13.15   Notices.



	 	 	13.15.1   Sufficient Notice. All notices, requests, demands, or other
communications under this Agreement will be in writing. Notice will be
sufficiently given for all purposes as follows:




	 	(A)	 	when personally delivered to the recipient, notice is
effective on delivery;
	 
	 	(B)	 	when mailed certified mail, return receipt
requested, notice is effective on receipt, if delivery is
confirmed by a return receipt;
	 
	 	(C)	 	when delivered by Federal
Express/Airborne/United Parcel Service/DHL WorldWide, or
United States Express Mail, charges prepaid or charged to the
sender’s account, notice is effective on delivery, if
delivery is confirmed by the delivery service; and
	 
	 	(D)	 	when sent by telex or fax to the telex or fax
number shown below, or if such telex or fax number is
inoperative, the last telex or fax number of the recipient
known to the Party giving notice, notice is effective on
receipt, provided that




	 	 	 
	(1)	 	
a duplicate copy of the notice is
promptly given by first-class or certified mail or by
overnight delivery, or
	 
	(2)	 	
the fax is acknowledged as
received by the receiving Party’s fax machine.




	 	 	 	Any notice given by telex or fax will be deemed received on the
next business day if it is received after 5:00 p.m. (recipient’s
time) or on a non-business day.




	 	 	13.15.2   Notice Refused, Unclaimed, or Undeliverable. Any correctly
addressed notice that is refused, unclaimed, or undeliverable because of
an act or omission of the Party to be notified will be deemed effective
as of the first date that said notice was refused, unclaimed, or deemed
undeliverable by the postal authorities, messenger, or overnight delivery
service.
	 
	 	 	13.15.4   Addresses. Addresses for purpose of giving notice are as set
forth immediately below, or such other addresses as may be designated in
writing by the Parties from time to time during the term of this
Agreement:




	 	 	 
	If to Cepheid:	 	
Cepheid
	 	 	
904 Caribbean Drive
	 	 	
Sunnyvale, CA 94089
	 	 	
FAX No.: 508-435-9342



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Attn.: Chief Executive Officer
	 	 	 
	If to ABI:	 	
Applied Biosystems
	 	 	
850 Lincoln Centre Drive
	 	 	
Foster City, CA 94404
	 	 	
FAX No.: 650-638-6677
	 	 	
Attn.: Legal Department




	 	 	13.16   Late Payment. If payment due a Party is not received by the due date,
the Party to whom payment is due may assess and the other Party agrees to pay a
late payment charge at the rate of 1% per month (12% per year) or the maximum
legal rate, whichever is less, of the amount due from the due date to the date
of payment. If a Party retains a collection agency and/or attorney to collect
unpaid amounts, Such Party may invoice the other Party for, and such other
Party will pay, all costs of collection, including without limitation
reasonable attorneys fees.
	 
	 	 	13.17   Costs. Except as otherwise expressly set forth in this Agreement,
Cepheid and ABI shall each be solely responsible for and bear all of its own
respective expenses, including, without limitation, expenses of legal counsel,
accountants and other advisors, incurred at any time in connection with
negotiating, pursuing or consummating this Agreement, any contract manufacture
and supply agreement or distributor agreement between the parties, and the
transactions contemplated by this Agreement or any such other agreements.
	 
	 	 	13.18   Dispute Resolution. ABI and Cepheid hereby irrevocably and
unconditionally agree as follows: Any controversy, claim or dispute arising
out of or relating to this Agreement, including without limitation, the
construction, interpretation, validity, enforcement, performance, lack or
failure of performance or breach of this Agreement, or the rights, duties or
liabilities of a Party under this Agreement, that cannot be resolved by the
Steering Committee shall be first referred to the Senior Vice President of
Business Development of ABI (as of the Effective Date, Joseph Smith) or, if
such position no longer exists, the individual holding an equivalent position
designated by ABI, and the Chief Executive Officer of Cepheid for resolution.
If such individuals cannot resolve the matter by agreement of the Parties
within fifteen (15) days of the matter being
referred to them by either Party, and either Party wishes to pursue the matter,
the controversy, claim or dispute shall be referred to Mediation in accordance
with Exhibit 13.18.
	 
	 	 	The Parties, through their authorized officers, have executed this Agreement as
of the Effective Date.




	 	 	 	 	 	 	 
	 	 	 	 	APPLERA CORPORATION, ACTING 
	 	 	 	 	THROUGH ITS APPLIED BIOSYSTEMS
	CEPHEID	 	 	GROUP	 
	 	 	 	 	 	 	 
	By:	 	 	 	By:
	 	 
	 	


	 	 	

	 	 	 	 	 	 	 
	Name:	 	 	 	Name: Michael W. Hunkapiller
	 	
	 	 
	 	 	 	 	 	 	 
	Title:	 	 	 	Title: Senior Vice President
	 	
	 	 
	 	 	 	 	 	 	 
	Date Signed:	 	 	Date Signed:
	 
	 	 	


	 	 	 	




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For Signature

aaxxcepheidCollabAgr10-02d4c3.sha



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Exhibit 13.18



Mediation



1.     The parties shall attempt to resolve any dispute arising out of relating to
this Agreement promptly by negotiation between executives who have authority to
settle the controversy, as set forth in Section 13.18


2.     If the parties do not resolve the dispute within 45 days of undertaking
negotiation thereof, either Party may refer the Dispute for mediation by JAMS
or its successor by providing to JAMS and the other Party a written request for
mediation, setting forth the details of the dispute and the relief requested.
Each Party must then participate in the mediation in good faith and share
equally in its costs. The mediation will be conducted in accordance with JAMS
mediation rules and procedures by: (i) a mediator agreed by the parties
selected from JAMS’ panel of neutrals; or (ii) if the parties do not agree on a
mediator, a mediator nominated by JAMS. All offers, promises, conduct and
statements, whether oral or written, made in the course of the mediation by any
of the parties, their agents, employees, experts and attorneys, and by the
mediator and any JAMS employees, are confidential, privileged and inadmissible
for any purpose, in any litigation or other proceeding involving the parties,
provided that evidence that is otherwise admissible or discoverable shall not
be rendered inadmissible or non-discoverable as a result of its use in the
mediation.


3.     If the dispute has not been resolved by non-binding means as provided herein
within 90 days of the initiation of such procedure, either Party may pursue
available remedies, including litigation. Notwithstanding the foregoing, if the
parties are not able to agree upon the cap for manufacturing costs as set forth
in Section 7.7 through negotiation or mediation, then such matter shall be
subject to binding arbitration. Either Party may initiate arbitration with
respect to such matters at any time following the period provided for
mediation, or determination by the mediator that the parties will not be able
to resolve the issue through mediation, by filing a written request for
arbitration to JAMS in accordance with JAMS arbitration procedures.


4.     Notwithstanding the foregoing, each Party shall have right before or during
negotiation or mediation to seek and obtain from the appropriate court
provisional remedies such as attachment, preliminary injunction, replevin,
etc., to avoid irreparable harm, maintain the status quo or preserve the
subject matter of the negotiations or mediation.


xcepheidCollabAgr10-02d4c3.sha


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with the commission. Confidential treatment has been requested with respect to the omitted portion.