Exhibit 10.27


 


LICENSE,  DEVELOPMENT
AND SUPPLY AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


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


 


1.             DEFINITIONS.  


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2.             TEST OPTIONS.


 


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


 


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


 


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


 


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


 


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


 


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


 


3.             LICENSE GRANTS.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3.9          Sublicensing Rights.  


 


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


 


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


 


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


 


4.             COLLABORATION.


 


4.1          Joint Development Programs.


 


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


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


10

















 


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


 


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


 


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


 


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


 


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


 


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


 


11

















 


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


 


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


 


4.2          Joint Steering Committee.


 


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


 


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


 


(ii)           Development and implementation of the Work Plan;


 


(iii)          Development and approval of budgets;


 


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


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


5.             COMMERCIALIZATION AND
REGULATORY MATTERS.


 


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


 


5.2          Development and
Commercialization Cooperation and Assistance by Cepheid.


 


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


 


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


 


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


 


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


 


14

















 


5.3          Regulatory Approvals.


 


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


 


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


 


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


 


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


 


15

















 


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


 


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


 


6.             PAYMENTS AND ROYALTIES.


 


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


 


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


 


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


 


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


 


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


 


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


 


16

















 


6.2            Earned Royalties.


 


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


 


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


 


7.             ROYALTY REPORTS AND
ACCOUNTING.


 


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


 


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


 


8.             SUPPLY OF PRODUCTS.


 


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


 


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


 


17

















 


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


 


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


 


8.3          Manufacturing Cost.  


 


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


 


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


 


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


 


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


 


18

















 


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


 


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


 


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


 


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


 


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


 


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


 


19

















 


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


 


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


 


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


 


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


 


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


 


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


 


8.4          Transfer Prices.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


20

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8.5          Quantity; Forecasts; Orders. 


 


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


 


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


 


21

















 


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


 


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


 


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


 


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



 


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


 


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


 


22

















 


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


 


8.8          Warranty/Recall


 


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


 


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


 


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


 


Factory
Repairs.  In the event it is necessary to return
defective Product to Cepheid’s facility for repair during the applicable
warranty period, the following shall apply:


 


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


 


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


 


23

















 


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


 


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


 


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


 


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


 


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


 


8.9          Failure or Inability to
Supply.


 


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


 


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


 


24

















 


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


 


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


 


8.9.3       Other Supply Failures;
Rights and Remedies.


 


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


 


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


 


8.10        Amendment of Product
Specifications and Manufacturing Process.


 


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


 


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


 


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


 


25

















 


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


 


8.11        Testing and Quality
Assurance.


 


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


 


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


 


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


 


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


 


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


 


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


 


26

















 


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


 


8.14        Records.


 


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


 


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


 


8.15        Termination of Supply and
Purchase Obligations.


 


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


 


The
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and filed separately with the commission. 
Confidential treatment has been requested with respect to the omitted
portion.


 


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shipping instructions and at BioMeriéux’s
expense.


 


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


 


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


 


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


 


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


 


9.             BIOMERIÉUX’S PRODUCTION LINE
OPTIONS.


 


9.1          Cartridges.


 


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



 


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


 


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


 


28

















 


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


 


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


 


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


 


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


 


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


 


The
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and filed separately with the commission. 
Confidential treatment has been requested with respect to the omitted
portion.


 


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


 


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


 


10.          GENERAL INTELLECTUAL
PROPERTY.


 


10.1        Ownership of Intellectual
Property.


 


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


 


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


 


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


 


The
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and filed separately with the commission. 
Confidential treatment has been requested with respect to the omitted
portion.


 


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


 


10.1.5     Collaboration Joint Patent
Rights.  


 


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


 


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



 


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


 


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


 


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


 


The
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and filed separately with the commission. 
Confidential treatment has been requested with respect to the omitted
portion.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


10.2        Filing of Patent
Applications.  


 


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


 


10.2.2     Collaboration Cepheid Patent
Applications .  


 


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



 


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


 


The
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and filed separately with the commission. 
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portion.


 


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


 


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


 


10.2.3     Collaboration BioMeriéux
Patent Applications.  


 


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


 


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



 


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


 


10.2.4     Collaboration Joint Patent
Appications.  


 


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


 


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and filed separately with the commission. 
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portion.


 


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


 


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


 


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


 


10.4        Third Party Licenses.


 


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


 


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



 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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and filed separately with the commission. 
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portion.


 


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


 


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


 


10.5        Patent Litigation.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


11.          TERM AND TERMINATION.


 


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


 


11.2        Termination.  


 


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


 


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


 


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portion.


 


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


 


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


 


11.3        Consequences of Termination.


 


11.3.1     Return of Material; Effect
on Licenses.


 


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


 


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


 


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


 


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


 


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


 


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


 


12.          CONFIDENTIALITY.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


42

















 


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


 


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


 


13.          REPRESENTATIONS, WARRANTIES
AND COVENANTS; DISCLAIMERS. 


 


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


 


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


 


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


 


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


 


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


 


43

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


44

















 


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


 


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


 


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


 


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


 


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


 


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


 


45

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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



 


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


 


46

















 


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


 


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


 


14.          RIGHTS OF AFFILIATES


 


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


 


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


 


15.          INDEMNIFICATION.


 


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


 


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


 


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


 


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


 


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


 


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


 


47

















 


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


 


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


 


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


 


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


 


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


 


16.          LIMITATION OF LIABILITY.


 


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


 


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


 


48

















 


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


 


17.          GENERAL PROVISIONS.


 


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


 


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


 


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


 


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


 


49

















 


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


 


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


 


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


 


17.6          Dispute
Resolution.


 


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


 


For Cepheid:                         Chief Executive Officer


 


For BioMeriéux:                                    Chief Executive Officer of US operations.


 


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


 


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


 


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


 


50

















 


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


 


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


 


if
to Cepheid, to:


 


[Cepheid]

904 Caribbean Drive

Sunnyvale, California  94089


Attn:       General Counsel


Facsimile:
408-400-4193


 


with
a copy mailed to:


 


Douglas
N. Cogen

Fenwick & West LLP

Embarcadero Center West

275 Battery Street

San Francisco, California  94111


Facsimile:  415-281-1350


 


if
to BioMeriéux, to:


 


[BioMeriéux]


100
Rodolphe Street


Durham,
NC, 27712


Attn:       President


Facsimile:
919-620-2519


with
a copy mailed to:


 


General
Counsel (Same address and fax).


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


17.14      Construction.


 


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


 


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


 


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


 


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


 


(iii)          “or” is not exclusive; and


 


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


 


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


 


[remainder of this page
intentionally left blank]


 


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portion of the exhibit has been omitted and filed separately with the
commission.  Confidential treatment has
been requested with respect to the omitted portion.


 


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


 


	
   

  	
  CEPHEID

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John L. Bishop

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BIOMERIÉUX, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Philippe Sans

  
	
   

  	
   

  	
  Title:

  	
  President & CEO

  
							



 


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portion of the exhibit has been omitted and filed separately with the
commission.  Confidential treatment has
been requested with respect to the omitted portion.


 


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Appendix 1


 


[***] Patents


 


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portion of the exhibit has been omitted and filed separately with the
commission.  Confidential treatment has
been requested with respect to the omitted portion.


 


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Appendix II


 


ALTERNATIVE DISPUTE RESOLUTION


 


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


 


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


 


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


 


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


 


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


 


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


 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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