**Exhibit 10.2**

 

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**[ * ]SUPPLY AGREEMENT**

 

This **[ * ]**SUPPLY AGREEMENT (hereinafter referred to as the “**SupplyAgreement**”), effective as of the date of last signature herein (“**Effective Date**”) is made and entered into by and among (i) **CombiMatrix Corporation**, which is a corporation organizedunder the law of the state of Delaware and has a primary business addresslocated at **6500 Harbour Heights Parkway, Suite 303,Mukilteo, Washington 98275** (hereinafter referred to as “**CombiMatrix**”) and (ii) **Illumina, Inc.,**which is a corporation organized under the law of the state ofDelaware and has a primary business address located at**9885 TowneCentre Drive, San Diego, CA 92121-1975 **(hereinafterreferred to as “**Illumina**”).

 

**AGREEMENT**

 

Inconsideration of the mutual covenants, agreements, representations, warranties,and conditions contained herein, the Parties hereby agree as follows:

 

# **1.**              Definitions.

# ** **

## **1.1**                               The term “**Parties**” means CombiMatrix and Illumina, and “Party” meanseither CombiMatrix or Illumina.

##  

## **1.2****                              **The term “**Field of Use**” is defined to be **[ * ]**.

##  

**1.3**                               The term “**QC Test**”is defined to be procedures set forth on Exhibit B.

 

**1.4**                               The term “**Indemnitees**”is defined in Section 9.2.

 

**1.5****                              **The term**“[ * ] Exclusivity”**isdefined in Section 3.7.

 

1.6                                 The term “**[ * ]**”means **[ * ]**.

 

**1.7**                               Additional terms and phrases are as definedin Exhibit D.

 

# **2.**              Term; Termination.

# ** **

## **2.1****                              **The “**Term**” begins on the Effective Date and ends on the End Date.The “**End Date**” is **[ * ]**,unless terminated earlier as permitted in this Supply Agreement, or extendedlonger as the Parties may mutually agree in a written amendment to this SupplyAgreement, in which case the End Date is the actual date of termination of thisSupply Agreement.

##  

**2.2****                              **Each Party has the right to terminate thisSupply Agreement earlier than the natural End Date stated in Section 2.1,upon (i) material breach of this Supply Agreement by the other Party,provided the non-breaching Party provides written notice of the material breachto the breaching Party and the breaching Party does not cure the breach withinthirty (30) days after the

 

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datethat the notice is sent, in which case the non-breaching Party has the right toprovide written notice of termination effective immediately or on a date setforth in the notice of termination, (ii) the institution of proceedings inreceivership, bankruptcy, or insolvency by or against the other Party or anassignment for the benefit of creditors or dissolution or liquidation of theother Party’s business whether voluntarily or by a third party, or (iii) pursuantto Section 19.2 (force majeure), provided the Party having the right toterminate this Supply Agreement provides written notice of terminationeffective immediately or on a date set forth in the notice. All parties havethe right to relief in equity and/or law for breach of this Supply Agreement.

 

**2.3**                               Subject to Section 3.5, Illumina has theright to terminate this Supply Agreement earlier than the natural End Date upon**[ * ]**prior written notice toCombiMatrix.

 

**2.4****                              **In the event that the Parties extend thisSupply Agreement beyond the natural End Date, CombiMatrix will have the rightto terminate this Supply Agreement upon sixty (60) days prior written notice toIllumina if Illumina does not submit purchase orders that in the aggregate(with its Affiliates) total **[ * ]** over anyone year extension period beginning on the first day of the first extensionperiod. For clarity, this Section 2.4 is not applicable during the firstyear of this Supply Agreement.

 

**2.5**                               Notwithstanding anything herein to thecontrary, in the event of termination or expiration of this Supply Agreementfor any reason, including for default by a Party, the Parties shall have nofurther rights and obligations to each other under this Supply Agreement, otherthan the continuing rights and obligations set forth in this Section 2.5.Termination or expiration does not relieve either Party of any liability or obligationthat accrued hereunder prior to the date of such termination nor precludeeither Party from pursuing all rights and remedies it may have hereunder or atlaw or in equity with respect to any breach of this Supply Agreement, norprejudice either Party’s right to obtain performance of any obligation. Allrights and obligations of the Parties set forth herein that expressly or bytheir nature survive the expiration or termination of this Supply Agreement,including confidentiality and payment obligations, and Sections 3.2, 3.4, 4-6,8-18, 19 (except for 19.2), and C1 (only second sentence), C3, C7, and C8 shallcontinue in full force and effect subsequent to and notwithstanding theexpiration or termination of this Supply Agreement, until they are satisfied,or by their nature, expire and shall bind the Parties and their legalrepresentatives, successors, and permitted assigns.

 

# **3.**              Supply; Rights; Limitations.

# ** **

## **3.1****                              **Supply of **[ * ]**. CombiMatrixagrees to supply **[ * ]**to Illumina and itsAffiliates for use in the Field of Use according to the pricing given in Exhibit Aand the terms and conditions set forth in this Supply Agreement, including inthis Section 3 and Exhibit C.

##  

## **3.2****                              **License to **[ * ]**. Under PatentRights and Know How Rights, and pursuant to payment for **[ * ]**according to this Supply Agreement, CombiMatrix hereby grants to Illumina andits Affiliates the royalty-free perpetual right to use and have used **[ * ]** in and for the Field of Use throughout the world. Forclarity, the license in this Section 3.2 does not grant Illumina or itsAffiliates or any party other than CombiMatrix the right to practice underPatent Rights or Know How Rights outside the Field of Use or the right to

 

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## manufacture or have manufactured **[ * ]**. Foradditional clarity, except as explained in the previous sentence, the licensein this Section 3.2 permits Illumina and its Affiliates to make, havemade, sell, have sold, offer for sale, have offered for sale, use, have used,import, and have imported Illumina Products, and nothing in this SupplyAgreement will limit the rights of Illumina and its Affiliates to confer rightsof use and resale upon any party that purchases or otherwise receives anIllumina Product from Illumina or an Affiliate thereof. For further clarity,any additional rights with respect to Patent Rights and Know How Rights thatCombiMatrix may grant to Illumina and its Affiliates are in separate agreementsbetween the Parties if and when such agreements are executed.

##  

## **3.3****                              **PricingUpdates. CombiMatrix agrees that, upon Illumina’s request,it will enter into good-faith negotiations with Illumina to update the pricingin Exhibit A to include pricing for **[ * ]**.

##  

## **3.4****                              **QC Test. If a **[ * ]** passes the QC Test listed in Exhibit B, then itis judged to be acceptable and may not be returned to CombiMatrix for refund.

##  

## **3.5****                              **Purchase OrderCommitment. Illumina agrees to submit purchase orders itselfor by its Affiliates for **[ * ]** that, inthe aggregate over the period beginning on the Effective Date and ending on **[ * ]**, total **[ * ]**. Forclarity, Illumina may submit purchase orders that exceed the **[ * ]** minimum. Upon termination of the Supply Agreementbefore **[ * ]** under Sections 2.1, 2.2 (ifCombiMatrix is the terminating party), 2.3, or 19.2, Illumina shall pay toCombiMatrix a non-refundable amount that is equal to **[ * ]**minus the sum of all amounts already paid by Illumina or its Affiliates, oralready committed to be paid, to CombiMatrix up to the End Date, for the supplyof **[ * ]** under this Supply Agreement. Forclarity, termination of this Supply Agreement at any time after Illumina haspaid to CombiMatrix the sum of **[ * ]** or morefor purchase of **[ * ]** under this Supply Agreementshall not require any additional payment by Illumina, other than amounts owedunder outstanding purchase orders. Any post-termination payment due pursuant tothis Section 3.5 shall be made within thirty (30) days after the End Date.

##  

## **3.6****                              ****[ * ]** and Custom Kit. Illuminaagrees that a **[ * ]** can be used to create one ormore Custom Kits of **[ * ]** (i.e.,uses included in all Custom Kits made from that **[ * ]**).  If Illumina sells more than one Custom Kitmade from a particular **[ * ]**, for eachCustom Kit sold beyond the first Custom Kit (i.e, for the 2nd and each higher Custom Kit sold), Illuminawill pay an “**Extra-Kit Amount**” toCombiMatrix.  In the first 12 monthperiod starting on the Effective Date, the Extra-Kit Amount is **[ * ]**.  In eachsuccessive 12-month period, the Extra-Kit Amount is **[ * ]**than in the previous 12-month period.

##  

## **3.7****                              **Option for **[ * ]**Exclusivity. Illumina hasa **[ * ]**period that starts on theEffective Date and ends **[ * ]**after theEffective Date to purchase **[ * ]**Exclusivity.  **[ * ]**

 

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## **[ * ]**. ** **Illumina can purchase **[ * ]**Exclusivity **[ * ]**.  If and when purchased, **[ * ]**Exclusivity terminates if Illumina purchases less than a rolling two quarteraverage of **[ * ]** worth of CombiMatrixproducts in any quarter starting from the time **[ * ]**Exlusivitystarts and continuing on thereafter. Illumina will be given the chance to makeup any shortfall in purchase within **[ * ]** after theend of the quarter in order to maintain **[ * ]**Exclusivity.  This additional purchase counts in theshortfall rolling average period but not outside the shortfall rolling-averageperiod (i.e., next period’s rolling average) — i.e., no double counting. If **[ * ]** Exclusivity begins during a quarter, the **[ * ]** purchase minimum will be prorated accordingly. **[ * ]**. “**[ * ] Exclusivity**”is defined as the **[ * ]** of **[ * ]** by CombiMatrix to Illumina and its Affiliates andCombiMatrix not entering into agreements with **[ * ]**where CombiMatrix is a supplier of **[ * ]** for **[ * ]**, wherein the **[ * ]**are usedin **[ * ]**products **[ * ]**.

##  

## **3.8****                              **Audit andInspection.  Illumina orits designee shall have the right to inspect, audit and/or test all **[ * ]** or services ordered hereunder, and the facilities inwhich they are produced or offered, at reasonable times before, during and/orafter manufacture or performance as well as after delivery or performance. Ifany inspection or test is made on CombiMatrix’s premises, it shall be done at adate and time mutually agreeable, and Illumina shall provide CombiMatrix withat least fifteen (15) business days advance notice prior to such inspection.CombiMatrix shall provide reasonable facilities and assistance for the safetyand convenience of Illumina’s inspectors in such manner as shall not unreasonablyhinder or delay CombiMatrix’s performance hereunder.   In the event of a nonconformance or an issueduring an inspection or audit, Illumina may, at Illumina’s sole discretion,send CombiMatrix a written notice requesting that CombiMatrix provide a writtencorrective and preventative action plan to Illumina (the “Corrective andPreventative Action Plan”).  TheCorrective and Preventative Action Plan shall be submitted to Illumina withinten (10) business days of such notice and shall include either (1) adescription of the reasons for the non-conformity or defect and the actionsCombiMatrix has taken or will take to reduce the likelihood that a similarnon-conformity or defect will not occur in a future shipment of **[ * ]** to Illumina or (2) if CombiMatrix believes thatthere is no nonconformance, issue, nonconformity, or defect, an explanation ofwhy CombiMatrix feels that it is in compliance with its responsibilities underthis Supply Agreement.  Illumina may notrequest more than two such inspections per year.  Each inspection may not last more than fivebusiness days.  CombiMatrix is notobligated to devote more than 80 man hours of work by its personnel or agentsduring each inspection.  Illumina willreimburse CombiMatrix for any materials or reagents expended at Illumina’srequest during an inspection. CombiMatrix, in its sole discretion, shall pick which of its personneland/or agents are involved in an inspection. Such inspections are limited to portions of CombiMatrix facilities andprocesses used to produce **[ * ]** underthis Supply Agreement.

 

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# **4.**              Inventions.

 

## **4.1****                              **Except asotherwise stated, any invention, discovery, innovation, improvement,suggestion, addition, or idea, whether patentable or not, that is made orarises under this Supply Agreement, is an “**Invention**”.Each Party retains title to and all rights in and to any Invention, Patent, or other intellectual property right thatarises from performance of the Parties’ respective obligations or rights underthis Supply Agreement, subject to the terms and conditions of any agreement inplace between a Party and that Party’s respective employees, agents, and/orcontractors, wherein such agreement pertains to inventions and assignment ofrights related thereto. Inventorship is determined by applicable patent law.Illumina retains all intellectual property rights pertaining to the CustomContent in a **[ * ]**.

##  

**4.2**                               Except as otherwise stated herein, if anyInvention arises under this Supply Agreement from the joint inventivecontribution of Illumina and CombiMatrix, it is a “**JointInvention**” and is jointly owned by Illumina and CombiMatrix. TheParties are jointly responsible for all costs and expenses associated with anyJoint Invention. The Parties shall determine which of them shall manageprosecution of any Patent directed to a Joint Invention, where thedetermination will be based on the subject matter of the Joint Invention andthe Party whose expertise is most aligned with that Joint Invention. Each Partyhas (i) the right to be informed of the patent status of a JointInvention, of which status includes the right to receive all substantivecorrespondence to and from a patent office and (ii) a right to have itscomments and requests regarding the Joint Invention considered by the managingParty with good faith and reason; the managing Party agrees to manage theprosecution in a manner that recognizes and respects the rights of the otherParty. A Party has the right to discontinue paying costs and fees associatedwith prosecution of a patent application or an issued patent for any JointInvention, provided that a Party who discontinues paying such costs will nolonger have the right to participate in prosecution decisions regarding thatJoint Invention and the other Party will have no obligation to keep that Partyinformed of prosecution matters regarding that Joint Invention. Other than asexpressly stated in this Section 4.2, neither Party has any obligation toaccount to the other Party for a Joint Invention.

 

**4.3**                               Rights of CombiMatrix in Inventionspertaining to **[ * ]** in the Field of Use are includedwithin Patent Rights or Know How Rights, as the case may be, and are subject tothe license in Section 3.2. CombiMatrix is not granted (expressly orimplied) any license or other right under any intellectual property owned by orlicensed to Illumina or its Affiliates, except for rights in Joint Inventionsas provided in Section 4.2.

 

# **5.**              Confidentiality.

# ** **

## **5.1****                              **To the extentpermitted by law, each Party agrees to treat in confidence, and not disclose toany individual or entity (except as permitted herein), for a period beginningon the Effective Date and ending three years after the End Date, any writteninformation provided to it by the other Party under this Supply Agreement thatis stamped “CONFIDENTIAL,” (or with a similar designation) (“**Confidential Information**”), except for information that (i) waspreviously known to the receiving party other than from disclosure by thedisclosing party, (ii) is or becomes publicly available through no faultof the receiving party, (iii) is disclosed to the receiving party by athird party who has the right to disclose that information without breaching aconfidentiality obligation to the other Party, (iv) is independentlydeveloped by the receiving Party without any

 

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## reliance on the information provided by the providing Party, or (v) isrequired to be disclosed by law, court order, rule, or regulation, providedthat promptly after becoming aware of the requirement for disclosure pursuantto this part (v), and prior to any disclosure, the Party who is required tomake the disclosure notifies the other Party and assists that other Party inany lawful efforts it may undertake to limit, restrict, or cancel therequirement to disclose and, thereafter, only discloses that amount ofinformation that is necessary to meet the requirement.

##  

## **5.2****                              **Any oraldisclosures between the parties shall be identified as being CONFIDENTIAL bywritten notice delivered to the other party within 30 days after the date ofthe oral disclosure and shall be included in Confidential Informationaccordingly.

##  

**5.3**                               A receiving Party may use ConfidentialInformation only as necessary to further the objectives of this SupplyAgreement. A receiving Party shall protect the Confidential Information usingat least the same degree of care it uses to protect its own ConfidentialInformation, but in no event shall it use less than reasonable care. Areceiving Party has the right to disclose the Confidential Information to itsemployees, Affiliates, agents, directors, officers, and representativesprovided that any such individual needs to have the Confidential Information tofurther the objectives of this Supply Agreement and has signed a writtenagreement of nondisclosure and limited use, of which agreement must have termsno less stringent than those set forth herein.

 

**5.4**                               A receiving Party shall promptly return anyConfidential Information upon the request of the other Party; however, it mayretain one copy of returned Confidential Information in its legal files only toensure compliance with this Supply Agreement.

 

# **6.**              Notices.

# ** **

## **6.1****                              **All notices,requests, demands, and other communications required hereunder shall be inwriting and are deemed to have been given if delivered or mailed bycertified mail, return receipt requested, or delivered by hand or by messengerto the person named below on the date such notice, request, demand, or othercommunication is received by the Party to whom they are sent:

##  

(i)                                     if to CombiMatrix, to:

 

CombiMatrix Corporation

6500 Harbour Heights Parkway, Suite 303

Mukilteo, WA 98275

Attention: CEO

cc: General Counsel

Facsimile: 425-493-2010

 

(ii)                                  if to Illumina, to:

 

Illumina, Inc.

9885 Towne Centre Drive

San Diego, CA 92121-1975

Attention: Vice President, Business Development

cc: General Counsel

Facsimile: 858-202-4766

 

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# **7.**              Amendment.

# ** **

## **7.1****                              **No amendment,alteration, or modification of the terms of this Supply Agreement is validunless made in writing and signed by duly authorized representatives of theParties.

##  

## **7.2****                              **Any validamendment, alteration, or modification of this Supply Agreement becomes a partof the original Supply Agreement.

##  

# **8.**              Previous Agreements; EntireAgreement.

# ** **

## **8.1****                              **Except for theConfidentiality Agreement between the Parties, effective October 9, 2008,of which agreement is applicable on its terms, this Supply Agreement, includingall Exhibits and valid amendments, supersedes any and all agreements, eitheroral or written, between the Parties with respect to the subject matter of thisSupply Agreement and contains all the covenants and agreements between theParties with respect to the subject matter of this Supply Agreement.Notwithstanding the foregoing, the Parties may have entered into or may in thefuture enter into other agreements that relate to CombiMatrix technology butnot to the supply rights and obligations of this Supply Agreement.

##  

## **8.2****                              **This SupplyAgreement may not be contradicted by evidence of any prior or contemporaneousstatements or agreements.

##  

## **8.3****                              **No Party hasbeen induced to enter into this Supply Agreement by, nor is any Party relyingon, any representation, understanding, agreement, commitment, or warrantyoutside those expressly set forth in this Supply Agreement.

##  

# **9.**              Liability; Indemnification.

# ** **

## **9.1****                              **Theindemnification and liability provisions of Sections 9.2, 9.3, and 9.4 areapplicable to this Supply Agreement only to the extent the indemnificationprovisions in Exhibit C are not applicable.

##  

**9.2**                               Indemnification. Subject to Sections 9.1, 9.3, and 9.4, eachParty (as first Party) shall defend, indemnify and hold harmless the otherParty (as second Party) and its Affiliates, officers, directors, employees,agents and representatives (collectively with the indemnified Party, the “**Indemnitees**”) from and against any and all third partyclaims, actions, demands, judgments, expenses, damages, and awards (including,without limitation, liability for court costs and reasonable fees of attorneysand other professionals), collectively “**Claims**”,brought or to which the second Party is subject as a direct result of (a) thegross negligence or intentional wrongdoing of the first Party, (b) breachof this Supply Agreement, including breach of Section 9.3 or anymisrepresentation or breach of a warranty, by a first Party, or (c) onlywith respect to

 

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Illumina as a first partyand CombiMatrix as a second party, the manufacture or sale of a **[ * ]** comprising Custom Content specified by Illumina or itsAffiliates. For clarity, CombiMatrix has no obligation to determine if **[ * ]** ordered by Illumina as Custom Content are subject tothird-party intellectual property rights.

 

**9.3**                               The obligation of the first Party to defend,indemnify and hold harmless set forth herein is conditioned upon (i) promptwritten notice to the first Party of any Claim for which indemnification issought, (ii) complete control of the defense and settlement thereof by theindemnifying first Party, (iii) cooperation of the Indemnitees in suchdefense, and (iv) the terms and conditions of this Supply Agreement. Thefirst Party is responsible for all indemnification costs and expenses,including reimbursement of reasonable costs and expenses of the second Party.

 

**9.4**                               Limit on Liability. NOTWITHSTANDING ANY PROVISION IN THISSUPPLY AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL EITHER PARTY BE LIABLE TOTHE OTHER FOR LOST PROFITS, DATA, OR BUSINESS, OR FOR ANY INDIRECT, SPECIAL,INCIDENTAL, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISINGOUT OF OR IN CONNECTION WITH THIS SUPPLY AGREEMENT, HOWEVER CAUSED AND ON ANYTHEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICTLIABILITY, OR OTHERWISE). THE TOTAL AND CUMULATIVE LIABILITY OF A PARTY ARISINGUNDER OR IN CONNECTION WITH THIS SUPPLY AGREEMENT SHALL IN NO EVENT EXCEED **[ * ]**, PROVIDED, HOWEVER, THAT THIS LIMIT ON LIABILITY SHALLNOT APPLY TO THE EXTENT THE LIABILITY IS A DIRECT RESULT OF THE GROSSNEGLIGENCE, BAD FAITH, WILLFUL DEFAULT, BREACH, OR MISCONDUCT OF THAT PARTY.THE LIMITATIONS SET FORTH IN THIS SECTION SHALL APPLY EVEN IF A PARTY HASBEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANYFAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

 

# **10.**       Assignment.

# ** **

## **10.1****                       **This SupplyAgreement is binding upon and inures to the benefit of the Parties and theirrespective successors and permitted assigns.

##  

## **10.2****                       **This SupplyAgreement and the rights, benefits, or obligations hereunder shall not beassigned or delegated in whole or in part by either Party without the priorwritten consent of the other Party, which consent shall not be unreasonablywithheld, delayed, or require any additional contractual consideration, exceptthat either Party may assign this Supply Agreement to an Affiliate without theneed for consent of the other Party, but will provide notice of the assignmentno later than thirty (30) days after such assignment. For clarity, CombiMatrixwill provide written notice and obtain Illumina’s consent before assigning thisSupply Agreement to any party, including an Affiliate, that would give Illuminathe right to **[ * ]**

 

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## [ * ]****is in effect at the time of theassignment.

##  

## **10.3****                       **Any purportedassignment or delegation other than in accordance with this Section isvoid and ineffective for all purposes.

##  

# **11.**       Confidentiality of AgreementTerms.

# ** **

## **11.1****                       **Subject tocontrary law, regulation, or court order, the Parties agree to maintain theterms of this Supply Agreement in confidence, even if not tangibly marked witha CONFIDENTIAL marking, under the terms and conditions of Article 5.

##  

# **12.**       Warranties; Lack of Warranty

# ** **

**12.1****                       **CombiMatrix represents and warrants thefollowing: (i) it is duly authorized to grant the rights and licenses itgrants to Illumina and its Affiliates under this Supply Agreement, (ii) itis the owner of the Patent Rights and Know How Rights, and (iii) as of theEffective Date, CombiMatrix does not have rights (by ownership or license) toany intellectual property other than Patent Rights and Know How Rights, whereinsuch intellectual property would be infringed by the practice by Illumina, itsAffiliates, or its customers of the rights granted under Section 3.2 ofthis Supply Agreement.

 

## **12.2**                        EXCEPT ASEXPRESSLY STATED IN THIS SUPPLY AGREEMENT, INCLUDING EXHIBIT C, COMBIMATRIXMAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER, INCLUDING, WITHOUTLIMITATION, EXPRESS OR IMPLIED WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY,OR FITNESS FOR A PARTICULAR PURPOSE AND ALL SUCH WARRANTIES AND ANY RELATEDWARRANTIES ARE EXPRESSLY DISCLAIMED.

##  

# **13.**       Paragraph Headings;Interpretation; Counterparts.

# ** **

## **13.1****                       **Paragraphheadings are inserted herein solely for convenience and shall not be construedas part of this Supply Agreement.

##  

## **13.2****                       **The terms “shall”and “will” are used synonomously; any use of “for example” is understood to bea non-limiting example; any use of “including” is understood to be followed by “butnot limited to” even if that phrase is not written; the singular and pluralterms are synonomous except as the context otherwise requires; the SupplyAgreement shall not be interpreted for or against either Party merely because aParty drafted this Supply Agreement.

##  

## **13.3****                       **The Parties mayexecute this Supply Agreement in counterparts, and each counterpart is deemedan original, and all counterparts, as a collective, constitute one agreement.

 

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# **14.**       Waiver.

 

## **14.1****                       **No term orcondition of this Supply Agreement is deemed to have been waived, and there isno estoppel against the enforcement of any provision of this Supply Agreement,except by written instrument of the Party who has the right to grant suchwaiver or estoppel.

##  

## **14.2****                       **No such writtenwaiver is deemed a continuing waiver unless specifically stated therein, andeach such waiver shall operate only as to the specific term or condition waivedand does not constitute a waiver of such term or condition for the future or asto any act other than that specifically waived.

##  

# **15.**       Severability.

# ** **

## **15.1****                       **If, for anyreason, any provision of this Supply Agreement is held in whole or in part tobe invalid, illegal, or unenforceable, such invalidity, illegality, orunenforceability shall not affect any other provision of this Supply Agreement,and each such other provision shall, to the full extent consistent with thelaw, continue in full force and effect, and the invalid, illegal, orunenforceable provision or part thereof shall, to the extent possible, beconstrued to effect its original intent.

##  

# **16.**       Governing Law.

# ** **

## **16.1****                       **This SupplyAgreement is deemed entered into in, and shall be interpreted, construed,performed, and enforced in all respects in accordance with, the laws ofWashington State.

##  

# **17.**       Official Language.

# ** **

## **17.1****                       **The officiallanguage of this Supply Agreement is English.

##  

## **17.2****                       **Documents ornotices not orginally written in English will have no effect under this SupplyAgreement until they have been translated into English and then transmitted tothe receiving party.

##  

## **17.3****                       **The Englishtranslation shall be the controlling form of document or notice.

##  

# **18.**       Authority.

# ** **

## **18.1****                       **Each Partyrepresents and warrants that it is duly authorized to enter into this SupplyAgreement and that in so doing it is not in violation of the terms or conditionsof any contract or other agreement to which it may be a party.

##  

**19. Additional Terms**.

 

**19.1**                        No Third-Party Beneficiaries. Nothing in this Supply Agreement is intended to or shall confer upon anyperson who is not a party to this Supply Agreement any rights, benefits orremedies of any nature whatsoever under or by reason of this Supply Agreement,nor shall any

 

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such person be entitled to assert any claimhereunder, other than the rights granted to an Affiliate of Illumina includingunder Section 3.2.

 

**19.2**        ForceMajeure.  Neither Party isresponsible for any failure to perform or delay attributable in whole or inpart to any cause beyond its reasonable control, including but not limited tofire, flood, tornado, earthquake, hurricane, lightning, government actions,actual or threatened acts of war, terrorism, civil disturbance or insurrection,sabotage, labor shortages or disputes not particular to a Party, failure ordelay in delivery by such Party’s suppliers or subcontractors, transportationdifficulties, shortage of energy, raw materials or equipment.  In the event of any such delay, the date ofdelivery or performance shall, at the request of the Party affected by theforce majeure, be deferred for a period equal to the time lost by reason of thedelay.  Notwithstanding the foregoing, ifsuch delay lasts for a period of three (3) months or more, the Party notaffected by the force majeure is entitled to terminate this Supply Agreementeffective immediately by providing written notice.

 

**19.3**        Bankruptcy.  For purposes of Section 365(n) ofTitle 11 of the United States Code, as amended, and any foreign equivalentsthereof (“**Bankruptcy Code**”), all rights andlicenses granted under this Supply Agreement are licenses of rights to “intellectualproperty” as such term is used in the Bankruptcy Code.  In the event of the commencement ofbankruptcy proceedings by or against a Party under the Bankruptcy Code, thatParty agrees that the other Party shall retain and may fully exercise all ofsuch licensed rights under this Supply Agreement (including any license grantedhereunder) and all of its rights and elections under the Bankruptcy Code.

 

**19.4**        Relationship of the Parties.  The Parties are independent contractors andare engaged in the operation of their own respective businesses.  Nothing contained in this Supply Agreementshall be construed as creating a partnership, joint venture, or agencyrelationship between the Parties or, except as otherwise expressly provided inthis Supply Agreement, as granting either Party the authority to bind orcontract any obligation in the name of or on the account of the other Party orto make any statements, representations, warranties, or commitments on behalfof the other Party.

 

**19.5**        Publicity; Use of Names.  Each Party shall obtain the prior writtenconsent of the other on all press releases or other public announcementsrelating to this Supply Agreement, including its existence or its terms.CombiMatrix agrees that it will not publicly disclose that it has entered intothis Supply Agreement with Illumina or otherwise use the name of Illumina orits Affiliates, without the prior written consent of Illumina.  Illumina agrees that it will not publiclydisclose that it has entered into this Supply Agreement with CombiMatrix orotherwise use the name of CombiMatrix or its Affiliates, without the priorwritten consent of CombiMatrix. Notwithstanding any of the foregoing, if required by law, includingwithout limitation by the U.S. Securities and Exchange Commission or any stockexchange or Nasdaq, then a Party may issue a press release or other publicannouncement regarding this Supply Agreement or any products developed and/orcommercialized hereunder provided that the other Party has receivedprior written notice of such intended press release or public announcement ifpracticable under the circumstances, and an opportunity to seek a protectiveorder if practicable under the circumstances, and the Party subject to therequirement includes

 

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in such press release orpublic announcement only such information relating to this Supply Agreement orany products developed and/or commercialized hereunder as is required by suchlaw.

 

## IN WITNESS WHEREOF, the Parties have executed this Supply Agreementeffective as of the date last written below by their duly authorizedrepresentatives.

 
| **CombiMatrix  Corporation:** | ** ** |
|-------------------------------|------------|
| Signature:                    |       |  /s/  Amit Kumar |   |
| Printed Name:                 |       |  Amit  Kumar, Ph.D. |   |
| Title:                        |       |  President &  CEO |   |
| Date:                         |       |  September 29,  2009 |   |
|                          |       |   |   |
| **Illumina, Inc.:**      | ** ** | ** ** |
| Signature:                    |       |  /s/  Joel McComb |   |
| Printed Name:                 |       |  Joel  McComb |   |
| Title:                        |       |  Senior  Vice President and General Manager |   |
| Date:                         |       |  September 29,  2009 |   |

 

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**Exhibit A:  Pricing**

 

**[ * ]**

 

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**[ * ]**

 

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**Exhibit B:  QC Test**

 

**[ * ]**

 

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**Exhibit C**

 

Additional Terms and Conditions for Supply of **[ * ]**

 

C1.          Purchase Orders; Specifications.

 

C1.1a      Illuminaor its Affiliates will order **[ * ]** bysubmitting a purchase order that will include the Custom Content of each **[ * ]** to be supplied and the timing and particulars fordelivery of same. (Reference to Illumina in this Exhibit C is understoodto be Illumina or its Affiliate, as applicable.) The **[ * ]**for each **[ * ]**ordered hereunder will beConfidential Information of Illumina and will be marked Confidential. For thepurpose of clarity, all orders of **[ * ]**arehereby marked as confidential and, therefore, are Confidential Information ofIllumina under this Supply Agreement. The terms and conditions of this SupplyAgreement and any consistent purchase order submitted by Illumina and acceptedby CombiMatrix will control any and all procurement of **[ * ]**byor on behalf of Illumina and shall supersede the terms of any orders, invoices,or other documents issued by CombiMatrix. CombiMatrix will accept any purchaseorder that is consistent with the terms of this Supply Agreement. In additionto rights under Paragraph C6, Illumina may modify or cancel any purchase orderby providing CombiMatrix written notice of such change prior to CombiMatrixbeginning **[ * ]**; such modification orcancellation may include, but is not limited to, modifying the quantity of andthe delivery date of **[ * ]**.

 

C1.1b      Theterm “**Production Time**” is defined as thenumber of days between receipt by CombiMatrix of a valid purchase order fromIllumina for **[ * ]** and the day upon whichCombiMatrix delivers the **[ * ]** to acommon carrier for shipment.  TheProduction Time for **[ * ]**shall notexceed **[ * ]** business days, and CombiMatrixshall use its best efforts to have **[ * ]** orderedby Illumina achieve a Production Time of **[ * ]** businessdays or less.  For clarity, as Illuminamay specify shipping and thus shipping times (such as not accepting packages onparticular days or delivering on particular days, using multi-day shipping insteadof overnight shipping, etc.), Production Time excludes the period for which the**[ * ]** are in transit to Illumina.  In the event that CombiMatrix will not beable to meet a Production Time of **[ * ]** businessdays, CombiMatrix shall notify the Illumina employee(s) generating thepurchase order via email and will also provide an estimate of what the revisedProduction Time will be.  If Illuminaresponds via e-mail that it still desires delivery of the original **[ * ]** ordered (the “**Order**”),CombiMatrix shall ship the Order as under the revised Production Time and theoriginal purchase order terms, and Illumina will be obligated to pay for theOrder according to the terms of this Supply Agreement.  If Illumina does not verify via responseemail within **[ * ]** business days that it stilldesires the Order (measured from the day that the original email was sent byCombiMatrix to Illumina), and CombiMatrix has confirmed that the email wasreceived and acknowledged, CombiMatrix will consider the Order to be cancelledwith no financial obligations incurred by Illumina for the original Order, andCombiMatrix will not ship the Order.

 

C1.2        CombiMatrix shall not make any changes to the**[ * ]** or changes to the manufacturing process of **[ * ]**or techniques that would result in a changein any **[ * ]** specification, performance, or functionality as measured pursuant to Exhibit Bwithout first obtaining the prior written approval of Illumina, which shall notbe

 

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unreasonably withheld or delayed.  Notwithstanding the foregoing, as Exhibit Acontains price reductions over time, CombiMatrix has (subject solely to its ownjudgment) the right to make refinements to its process of producing **[ * ]**, possibly including but not limited to **[ * ]**.  For clarity, a **[ * ]** shall be judged acceptable if it passes the QC Test in Exhibit B.

 

C1.3        In the event CombiMatrixdetermines that **[ * ]**will no longer be madeavailable to Illumina, CombiMatrix will provide written notice to Illumina noless than **[ * ]** calendar days prior to the dateon which the **[ * ]** will no longer be availableto Illumina. Illumina will have **[ * ]** calendardays from that notice within which to place an end-of-life purchase orderhaving shipping and delivery-time terms that are consistent with previouspurchase orders filled under this Supply Agreement. For the avoidance of doubt,Illumina has the right to place an end-of-life purchase order prior to thenatural End Date of this Supply Agreement.

 

C1.4        Ifeither Party believes that forecasting is necessary to ensure the requiredvolume of supply, then CombiMatrix and Illumina will negotiate in good faith toamend this Supply Agreement to set forth terms and conditions regardingquarterly forecasts.

 

C2.  Pricing; Payment; Taxes; Invoice. Thepricing in Exhibit A is for **[ * ]** from a **[ * ]**. Payments by Illumina for purchase of a **[ * ]** are due hereunder within thirty (30) calendar daysafter receipt of an invoice from CombiMatrix. Any **[ * ]**purchased hereunder may become a component part of an Illumina Productmanufactured by Illumina and/or bought for re-sale, and no retail sales tax isapplicable. All payments shall be made free and clear of, and without reductionfor, any withholding or other taxes, unless CombiMatrix has the legalobligation to collect taxes, in which case the appropriate amount will be addedto its invoice to Illumina. CombiMatrix shall render a separate invoice foreach shipment made hereunder to Illumina’s Accounts Payable Department, or asspecified on the purchase order, on the day each shipment is made. Each invoiceshall include at least the following information,; as applicable: (i) Illumina’spurchase order number, (ii) Illumina’s part number if provided byIllumina, (iii) the quantity of goods shipped, (iv) the date shipped,(v) the address to which the goods were shipped, and (vi) any otherinformation requested by Illumina to be on the invoice. In addition to theprice of **[ * ]** ordered (and required taxes, ifany, as explained above), an invoice will include any costs to be paid byIllumina pursuant to Paragraph C5. A minor discrepancy regarding theinformation required by Illumina to be set forth on an invoice does not relieveIllumina from timely payment.

 

C3.          Quality Testing. If the QC Testin Exhibit B is performed by Illumina or its Affiliate on a **[ * ]** and the **[ * ]**passesthe QC Test, then the **[ * ]** is judgedto be acceptable and may not be returned to CombiMatrix for refund. If any **[ * ]** does not pass the QC Test when performed by Illuminaor its Affiliate, then Illumina

 

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shallprovide written notice and **[ * ]** toCombiMatrix within 30 days of Illumina receiving the **[ * ]**,and CombiMatrix will provide Illumina with a replacement **[ * ]**within thirty (30) days at no additional charge to Illumina. In the event thereplacement **[ * ]** is not provided within thestated time period or does not pass the QC Test, then CombiMatrix will immediatelyrefund to Illumina the purchase price (including costs and expenses paidaccording to Paragraph C5) of the initial **[ * ]** thatfailed the QC Test. In the event that the notice of failure to pass QC and **[ * ]** is not received by CombiMatrix within 30 days ofIllumina receiving the **[ * ]**, thenCombiMatrix is not required to replace the **[ * ]** or refundthe purchase price.

 

C4.          Titleand Risk of Loss.  Shipments of **[ * ]** shall be FOB point of origin. Title and risk of lossor damages to a **[ * ]** will pass to Illumina upondelivery of the **[ * ]** by CombiMatrix to thetransportation carrier. CombiMatrix will make every reasonable effort to assistIllumina in filing any claims associated with improper transportation andhandling or loss or damages to a **[ * ]** duringtransit.

 

C5.  Shipping;Packing; Insurance; Delivery. All transportation andtransportation insurance costs will be the responsibility of Illumina and, ifpaid by CombiMatrix, the actual costs will be set forth on the invoice forreimbursement by Illumina. Illumina shall have the right to specify shipper andinsurer that will be used to ship **[ * ]**. IfIllumina fails to specify a shipper and/or insurer, then CombiMatrix may selectthe shipper and/or insurer. CombiMatrix shall be responsible for proper packingof **[ * ]**. Illumina may request CombiMatrixto provide special packaging at the expense of Illumina. CombiMatrix shall notcombine in the same container **[ * ]** to besent to different receiving locations. CombiMatrix shall ship **[ * ]** in the quantity as specified on the purchase order tothe point of destination specified on the purchase order and no later than thedate specified on the purchase order.

 

C6.          Failure to Deliver or MeetRequirements.  CombiMatrix shallimmediately provide Illumina written notice of any inability to or delay indelivering **[ * ]** under this Supply Agreementor any purchase order hereunder. In the event CombiMatrix fails, for any reasonincluding, without limitation, to supply **[ * ]** that meetspecifications, quantities required, or delivery dates, Illumina shall have allrights and remedies available at law, including, but not limited to: (a) theright to cancel all or a part of the purchase order(s) affected by thefailure, (b) require CombiMatrix to ship **[ * ]**via an expedited delivery method, and CombiMatrix will pay difference in costand expense over normal shipping, or (c) the right to terminate thisSupply Agreement by providing thirty (30) days written notice to CombiMatrix.

 

C7.          InfringementIndemnification by CombiMatrix.

 

C7.1        Subjectto Paragraphs C8 and C9, and Sections 9.1 and 9.4, CombiMatrix shall defend,indemnify and hold harmless Illumina, its Affiliates, its customers, and therespective officers, directors, employees, distributors, and representatives ofeach (“**Illumina Indemnitees**”) from and againstany and all claims, actions, or demands (including, without limitation,liability for court costs and reasonable fees of attorneys and otherprofessionals),

 

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collectively,alleging that the **[ * ]** sold toIllumina hereunder infringes any intellectual property right of any third party(collectively “**Infringement Claims**”), except tothe extent any such Infringement Claim is a direct result of (a) CombiMatrix’scompliance with a custom specification, including Custom Content, provided byIllumina to CombiMatrix, (b) a combination with, an addition to, or amodification of the **[ * ]** afterdelivery by CombiMatrix to Illumina or its designee, or (c) use of the **[ * ]** in a manner not permitted under this Supply Agreement.However, to the extent any of (a), (b), or (c) is applicable to anInfringement Claim, that Infringement Claim shall not be excluded fromthe obligation to indemnify the Illumina Indemnitees to the extent theInfringement Claim: (i) arose as a result of the gross negligence orintentional wrongdoing of CombiMatrix, or (ii) arose as a result of breachof this Supply Agreement by CombiMatrix, including misrepresentation of anyrepresentation or breach of any warranty made herein.

 

C7.2        Inthe event use by Illumina, its Affiliates or a customer of either of any **[ * ]**, or a product made therefrom that comprises **[ * ]** in a **[ * ]**, isenjoined due to infringement of any third party’s intellectual property rights,and the infringement is not a direct result of an exception set forth inParagraph C7.1 (a), (b), or (c), Illumina shall permit CombiMatrix: (1) toprocure for Illumina the right to use or continue to use such **[ * ]** or product free of any liability for patentinfringement; or (2) replace or modify the applicable **[ * ]**without any material loss in functionality so as to avoid infringement; or (3) refundthe purchase price and the transportation costs of such **[ * ]**,except that CombiMatrix will not refund the purchase price of **[ * ]** already received by Illumina and that pass the QCTest  If infringement is alleged, thenCombiMatrix may decline to make further shipments of the **[ * ]**without being in breach of this Supply Agreement.

 

C8.          IndemnificationConditions. The obligation to indemnify in Paragraph C7 isconditioned upon: 1) prompt written notice provided by Illumina of anyInfringement Claim for which indemnity is sought; 2) complete control of thedefense and settlement thereof by CombiMatrix; 3) cooperation of the IlluminaIndemnitees in such defense, and 4) the terms and conditions of this Supply Agreement.CombiMatrix shall be responsible for all indemnification costs and expenses,including the reasonable costs of the Illumina Indemnitees.

 

C9.          Insurance. Throughout theTerm of this Supply Agreement so long as CombiMatrix is supplying **[ * ]** to Illumina, and for **[ * ]**thereafter, each Party shall maintain general liability and property damageliability insurance coverage. Such insurance shall have policy limits of noless than $**[ * ]** per occurrence for death orpersonal injury, $**[ * ]** peroccurrence for real and personal property damage, and $**[ * ]**umbrellaaggregate liability per year.

 

C10.            Warrantyfor **[ * ]**. CombiMatrix warrants that a **[ * ]** will, for a QC test done within 30 days of Illumina’sreceipt of the **[ * ]**, pass the QC test.

 

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EXHIBITD

ADDITIONALDEFINITIONS APPLICABLE TO **[ * ]**, SUPPLYAGREEMENT, **[ * ]**

 

Theterm “**Affiliate**” is defined as any person orentity that controls, is controlled by, or is under common control with aParty, wherein control is the right to control, directly or indirectly, morethan fifty percent (50%) of the equity securities or other ownership interestsin the subject entity entitled to vote in the election of directors or with thepower to direct or elect management of such subject entity.

 

Theterm “**Custom Content**” is defined as all **[ * ]** information provided or otherwise disclosed byIllumina or its Affiliates to CombiMatrix to **[ * ]**having said **[ * ]**information.

 

Theterm “**Custom Kit**” is defined as a productmade by or for Illumina or any of its Affiliates, wherein the product contains **[ * ]**. For clarity, a Custom Kit may or may not includeadditional components, including but not limited to other consumables,reagents, and instructions sheets.

 

Theterm “**[ * ]**” is defined as **[ * ]** made by CombiMatrix or an Affiliate thereof forIllumina or an Affiliate thereof pursuant to the Supply Agreement.

 

Theterm “**[ * ]**” is defined as **[ * ]**.

 

Theterm “**Illumina Product”** is defined as aproduct, including a Custom Kit, made by or for Illumina or any of itsAffiliates using or containing **[ * ]**.

 

Theterm “**Know How Rights**” is defined as any andall rights, other than Patent Rights, that CombiMatrix and its Affiliates havein knowledge, information, methods, or material, all of which are necessary forthe use, development, manufacture, or commercialization of **[ * ]**,including the **[ * ]**, software (includingSoftware), consumables, and equipment related therewith. If and when a rightwithin Know How Rights becomes part of the subject matter of the claims of oneor more Patents, such Know How Rights shall be included within Patent Rights.

 

Theterm “**[ * ]**” is defined as **[ * ]**.

 

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Theterm “**[ * ]**” is defined to mean the right to **[ * ]** using CombiMatrix-supplied **[ * ]**,using CombiMatrix Know-How Rights and Patent Rights regarding production of **[ * ]**, and using the **[ * ]**.

 

## The term “**[ * ]**” isdefined as **[ * ]**.

##  

Theterm “**[ * ]**” is defined as **[ * ]**.

 

## The term “**[ * ]**” isdefined as **[ * ]**.

##  

Theterm “**Patent Rights**” is defined as any andall rights CombiMatrix and its Affiliates have in Patents that are directedtowards **[ * ]**, and related software (includingSoftware), consumables, and equipment of the same, as well as methods andcompositions for making and using same, including the **[ * ]**.For clarity, Patent Rights includes rights CombiMatrix has in Patents throughownership, license, or other manners of transfer of rights as of the EffectiveDate and during the Term.

 

Theterm “**Patents**” is defined as United Statesand non-United States (i) unexpired letters patents (including inventor’scertificates) that have not lapsed or been held invalid or unenforceable by acourt or administrative body of competent jurisdiction from which no appeal canbe taken or has been taken within the required time period, including, withoutlimitation, any substitution, extension, registration, confirmation, reissue,reexamination, renewal or any like filing thereof and (ii) pendingapplications for letters patent that have not been the subject of a rejectionnotice to which a response cannot be filed or from which an appeal cannot betaken or in respect of which the applicable period of appeal has expired,including, without limitation, any continuation, division, orcontinuation-in-part thereof and any provisional applications.

 

Theterm “**Software**” is defined as software orfirmware programs owned by or licensed to CombiMatrix and provided with the **[ * ]** by CombiMatrix, and any updates and upgrades of theforegoing provided by CombiMatrix.

 

Theterm “**Supply Agreement**” is defined as theagreement between the Parties pertaining to supply of **[ * ]**by CombiMatrix to Illumina and its Affiliates.

 

Theterm “**[ * ]**” is defined as **[ * ]**.

 

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Theterm “**[ * ]**” is defined as **[ * ]**.

 

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