Document:

exv10w4

 

Exhibit 10.4

CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC INFORMATION HAS BEEN
FILED WITH THE SECURITIES EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.

First Amendment to the Distribution Agreement

between

INFECTIO DIAGNOSTIC (I.D.I) INC and CEPHEID of November 4, 2003

This is the first amendment (“Amendment”) to the Distribution Agreement between Infectio
Diagnostic (I.D.I.), Inc. and Cepheid of November 4, 2003 appointing Cepheid as a
nonexclusive distributor of IDI Manufactured Products (hereinafter the “2003 Agreement”).
This Amendment is made as of 01 June 2005 (the “Effective Date”) and is by and between
GeneOhm Sciences Canada, Inc. (formerly Infectio Diagnostics, (I.D.I.) Inc.), a wholly owned
subsidiary of GeneOhm Sciences, Inc. and Cepheid who are sometimes referred to herein
individually as a “Party,” and collectively as the “Parties.”

WHEREAS the Parties wish to amend the Agreement;

NOW THEREFORE, the Parties agree as follows:

	 	1.	 	New Paragraph 2.5 is added as follows:

2.5 Field Action or Product Recall. If IDI notifies
Cepheid that a field action or product recall is required, Cepheid
agrees that it shall as expeditiously as possible issue a written
field action or product recall notice to all affected customers.
Cepheid will reasonably cooperate with IDI in regard to any such
notification.

	 	2.	 	New paragraph 2.6 is added as follows:

2.6 Duties of IDI.

     2.6.1 IDI shall sell IDI Manufactured Products that materially
conform to their published product specifications ordered by
Cepheid. IDI will endeavor to provide Cepheid with the best
possible dating based on purchase orders received and manufacturing
schedules.

     2.6.2 IDI reserves the right at any time to change the
specification or design of any IDI Manufactured Product without
prior notice or approval. In the event of any such change in
specifications or design for which IDI submits a regulatory filing,
IDI will, to the extent possible, provide Cepheid prior notice of at

			
	 	 	 
	CONFIDENTIAL
	 	First Amendment to Distribution Agreement (IDI Products)

 

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

 

 

	 	 	 	least 6 months. IDI shall be under no obligation to make any change
in any IDI Manufactured Products in the stock of Cepheid or any IDI
Manufactured Products shipped to but not received by Cepheid unless
the change is made to correct a safety or operational deficiency, or
is required by the U.S. Food and Drug Administration (FDA) in which
case IDI shall immediately notify Cepheid of such modification and
Cepheid shall return to IDI all such products in its inventory, or
that it subsequently receives, if requested by IDI and shall
cooperate with IDI to notify and, where appropriate, request the
return or destruction of any affected IDI Manufactured Products
already shipped to Cepheid, and IDI shall immediately replace any
such returned or destroyed products with such modified products.
	 
	 	3.	 	Paragraph 3.1 shall be deleted and replaced with the following:

3.1 Sales Process. Cepheid shall order IDI Manufactured
Products by submitting written purchase orders to IDI separately for
products that are to be delivered to Cepheid in Sunnyvale, CA
(hereinafter Cepheid US) and Cepheid SA in France, for distribution
by those organizations in their respective territories. Such IDI
Manufactured Products delivered to Cepheid US will not be
re-delivered by Cepheid US to Cepheid SA, without identifying to IDI
the shipment, in order to provide for proper pricing under Exhibit
C. Cepheid will endeavor to specify delivery dates at least thirty
(30) days from the date of the purchase order. IDI will endeavor to
ship, but will not guarantee shipment of, purchase orders submitted
with specified delivery dates less than thirty (30) days from the
date of the purchase order. Purchase orders shall specify, at a
minimum: (a) a description or identification of the IDI
Manufactured Product(s) and the quantity of each IDI Manufactured
Product ordered, (b) the delivery date (as applicable), (c) the
applicable price, and (d) the instruction for invoicing, including
the address to which invoices shall be sent for payment. All
purchase orders shall be accepted by IDI and no purchase orders
shall be modified or cancelled without written agreement by both
Parties. At the beginning of each month, Cepheid shall provide IDI
a revised 12 month rolling forecast, of which the first month will
have a binding minimum purchase obligation of [***] percent
([***]%). Should Cepheid’s needs in the first month increase beyond
the forecast, IDI will endeavor to meet this increase need but makes
no guarantees above forecast amounts.

	 	4.	 	Paragraph 3.2 shall be deleted and replaced with the following:

3.2 Prices.

			
	 	 	 
	CONFIDENTIAL
	 	First Amendment to Distribution Agreement (IDI Products)

 

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

 

 

	 	 	 	IDI will transfer the IDI Manufactured Products to Cepheid at its
respective destinations, at the pricing detailed in Exhibit C of
this Agreement, which pricing may change from time-to-time upon
written agreement between the Parties (“Transfer Price”). For IDI
Manufactured Products not listed in Exhibit C, the Parties agree to
discuss transfer pricing at least thirty (30) days prior to
commercial launch. Unless otherwise agreed, for the first thirty
(30) days post launch the initial Transfer Price will be [***]%
below IDI’s list price, and thereafter the Parties will agree on a
set Transfer Price based on market acceptance, demand and transfer
prices for comparable products, but in no instance will the Transfer
Price be higher than [***]% off IDI’s list price.
	 
	 	5.	 	Old paragraph 3.3 shall be renumbered as 3.3.1 and shall
otherwise remain intact.
	 
	 	6.	 	New Section 3.3 shall be titled “Customer Complaints.”
	 
	 	7.	 	New paragraph 3.3.2 shall be added as follows:

3.3.2 Regulatory

     i. Cepheid shall collect and forward to IDI all details of any
Customer Complaints regarding IDI Manufactured Products on at least
a [***] basis, and [***] if necessary. Such Complaint information
may exclude specific information related to the identity of the
customer. IDI shall use reasonable commercial efforts to assess and
resolve such complaints. When requested by IDI, Cepheid shall use
its reasonable commercial efforts to assist IDI in further
investigation of Customer complaints and shall provide IDI with any
information regarding Cepheid’s internal investigation activities,
including, but not limited to, investigational protocols and the
resulting data.

     ii. Cepheid shall notify IDI expeditiously, but in no event
later than [***] days after receipt, of information that reasonably
suggests that an IDI Manufactured Product (a) may have caused or
contributed to a death or serious injury; or (b) has malfunctioned
and, if the malfunction recurs, is likely to contribute to a death
or serious injury. Cepheid shall use its reasonable commercial
efforts to cooperate with and assist IDI in the investigation of any
such report.

     iii. The Parties agree that the obligations of i and ii herein
shall be applicable to any approved sub-distributors as amendments
to existing agreements, or as obligations to be contained in future
agreements.

			
	 	 	 
	CONFIDENTIAL
	 	First Amendment to Distribution Agreement (IDI Products)

 

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

 

 

	 	8.	 	New paragraph 3.3.3 shall be added as follows:

3.3.3 Medical Device Vigilance. Cepheid will comply with
the European Commission Guidelines On A Medical Devices Vigilance
System. Cepheid will notify IDI as expeditiously as reasonable
under the circumstances and directly in such matters in compliance
with the European Commission Guidelines On A Medical Devices
Vigilance System.

	 	9.	 	Paragraph 4.1 shall be deleted and replaced with the following:

4.1 Invoicing and Payment Terms. On a monthly basis IDI shall issue
invoices to Cepheid, consistent with the then-current prices set
forth in Section 3.2 and Exhibit C of this Agreement for IDI
Manufactured Products, and Cepheid shall pay IDI within forty-five
(45) days of the date of receipt of such invoice. Cepheid will pay
all amounts due under this Agreement in immediately available funds
and U.S. currency, free of any currency controls or other
restrictions. Within [***] ([***]) days of the end of each calendar
month, Cepheid will provide IDI a statement itemizing the quantities
of IDI-MRSA 200 test kit(s) sold in the previous calendar month to
accounts which satisfy both of the following requirements: (i) an
existing supply contract with an effective date prior to December
31, 2004; and, (ii) a verified commercial transaction for the
purchase of at least one IDI MRSA 200 test kit executed prior to
December 31, 2004 (“Grandfathered Accounts”). Within [***] ([***])
days of the receipt of such statement, IDI will issue a credit note
to Cepheid for each kit sold to Grandfathered Accounts, or will
provide Cepheid with notice of any disagreement with such statement.
If necessary, as determined by IDI, Cepheid agrees to provide
sufficient identifying information for each Grandfathered Account so
as to allow IDI to keep accurate records. Said credit note will
automatically be applied to Cepheid’s next invoice, unless otherwise
requested in writing, and shall be equal to, on a per test basis,
the difference of the Grandfathered Price (hereinafter defined in
Exhibit C) and the then current per test price of the IDI MRSA 200
test kit, as specified in Section 3.2 and Exhibit C of this
Agreement.

	 	10.	 	New Paragraph 9.4 is added as follows:

9.4 Limited Warranties

     9.4.1 Returns: All returns require the prior
approval of IDI. IDI shall issue a Return Authorization
(RA) Number, and all shipments of returned IDI

			
	 	 	 
	CONFIDENTIAL
	 	First Amendment to Distribution Agreement (IDI Products)

 

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

 

 

	 	 	 	Manufactured Products and associated documentation must
reference the RA Number. Items returned to IDI without
prior approval or without reference to a valid RA Number
shall be returned to Cepheid at Cepheid’s expense.
	 
	 	11.	 	New Exhibit C shall be added as follows:

Exhibit C

Pricing

     The following prices shall be in effect as of the effective date of this Amendment.

	 	(i)	 	For Delivery to Cepheid in the United States:

	 	 	 	 	 	 	 
	 	 	IDI MRSA 200 Test Kit	 	IDI MRSA 48 Test Kit	 	IDI Step-B Kit
	             Transfer Price (per test):

	 	$[***] (USD)	 	$[***] (USD)	 	$[***] (USD)

	 	(ii)	 	For delivery to Cepheid in Europe:

	 	 	 	 	 	 	 
	 	 	IDI MRSA 200 Test Kit	 	IDI MRSA 48 Test Kit	 	IDI Step-B Kit
	              Transfer Price (per test):
	 	$[***] (USD)	 	$[***] (USD)	 	$[***] (USD)

	 	(iii)	 	Grandfathered Price (per test): $[***] (USD)

     The Parties, through their authorized officers, have executed this Agreement as of the Effective Date.

	 	 	 
	GeneOhm Sciences Canada, Inc.

	 	Cepheid
	 
	 	 
	By: /s/ Peter Klemm

	 	By: /s/ Joseph H. Smith
	 
	 	 
	Name: Peter Klemm

	 	Name: Joseph H. Smith
	 
	 	 
	Title: CEO

	 	Title: Sr. Vice President, General Counsel
	 
	 	 
	Date Signed: 9/30/05

	 	Date Signed: 9/30/05

			
	 	 	 
	CONFIDENTIAL
	 	First Amendment to Distribution Agreement (IDI Products)

 

The symbol [***] is used to indicate that a portion of the exhibit has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to the omitted portion.exv10w5

 

CONFIDENTIAL

Exhibit 10.5

CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC INFORMATION HAS BEEN
FILED WITH THE SECURITIES EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.

LICENSE AGREEMENT

     THIS LICENSE AGREEMENT (this “Agreement”) dated as of September 30, 2005 (the “Effective
Date”), is entered into between Abaxis, Inc. a California corporation (“Abaxis”), having a place of
business at 3240 Whipple Road, Union City, CA, 94587, and Cepheid, a California corporation
(“Cepheid”), having a place of business at 904 Caribbean Drive, Sunnyvale, CA 94089.

     WHEREAS, Abaxis owns or has rights in certain technology regarding lyophilized beads or
reagent spheres.

     WHEREAS, Cepheid desires to obtain a non-exclusive worldwide license under Abaxis’ rights in
such technology to develop and commercialize products for use in nucleic acid based amplification
assays for diagnostic applications.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained, the parties agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 “Affiliate” shall mean, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control with, such Person. A
Person shall be regarded as in control of another Person if it owns, or directly or indirectly
controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other
Person, or if it directly or indirectly possesses the power to direct or cause the direction of the
management and policies of the other Person by any means whatsoever.

     1.2 “Confidential Information” shall mean, with respect to a party, all information of
any kind whatsoever, and all tangible and intangible embodiments thereof of any kind whatsoever,
which is disclosed by such party to the other party and is marked, identified as or otherwise
acknowledged to be confidential at the time of disclosure to the other party. Notwithstanding the
foregoing, Confidential Information of a party shall not include information which the other party
can establish by written documentation (a) to have been publicly known prior to disclosure of such
information by the disclosing party to the other party, (b) to have become publicly known, without
fault on the part of the other party, subsequent to disclosure of such information by the
disclosing party to the other party, (c) to have been received by the other party at any time from
a source, other than the disclosing party, rightfully having possession of and the right to
disclose such information, (d) to have been otherwise known by the other party prior to disclosure
of such information by the disclosing party to the other party, or (e) to have been

 

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

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independently developed by employees or agents of the other party without access to or use of
such information disclosed by the disclosing party to the other party.

     1.3 “Cepheid Foreign Distributor” shall mean a distributor authorized by Cepheid to
sell outside of the United States, Cepheid’s Licensed Products provided by Cepheid to the
distributor in their final package form and without any re-packaging or modification to the
Licensed Product by the distributor.

     1.4 “District Court Action” shall mean the lawsuit asserting claims of infringement
against Cepheid under multiple United States patents owned by Abaxis in the action of Abaxis, Inc.,
v. Cepheid, Inc., Case No. C 05-3618 PVT, pending as of the Effective Date in the United States
District Court for the Northern District of California.

     1.5 “Field of Use” shall mean nucleic acid based amplification assays excluding for
use in molecular biology research and isothermal rolling circle amplification.

     1.6 “Licensed Patent” U.S. patents and patent applications claiming priority from the
U.S. patent application No. 07/747,179 including any reissues, reexaminations, extensions and
continuations-in-part, and specifically including U.S. Patent Nos. 6,251,684, 5,998,031, 5,776,563,
5,624,597 and 5,413,732, and their corresponding foreign patents and patent applications.

     1.7 “Net Sales” shall mean, with respect to any Licensed Product, the gross invoiced
sales price of such Licensed Product by Cepheid, its Affiliates, or distributors billed to third
party customers, less (a) credits, allowances, discounts and rebates to, and chargebacks from the
account of, such independent customers for spoiled, damaged, out-dated, rejected or returned
Licensed Product; (b) actual freight and insurance costs incurred in transporting such Licensed
Product to such customers; (c) cash, quantity and trade discounts and other price reductions; (d)
sales, use, value-added and other direct taxes incurred; and (e) customs duties, surcharges and
other governmental charges incurred in connection with the exportation or importation of such
Licensed Product. For avoidance of doubt, Net Sales shall not include sales among Cepheid, its
Affiliates and distributors for resale, provided that Net Sales shall include the amounts invoiced
by Cepheid, Affiliates or distributors, as the case may be, on the resale of such Licensed Product
in arms length transactions to third party customers. Notwithstanding the foregoing, Net Sales
with respect to sales through Cepheid Foreign Distributors taking place outside of the United
States shall be the amount invoiced between Cepheid and Cepheid Foreign Distributors. Furthermore,
Net Sales with respect to sales through Northrop Grumman Security Systems, LLC (NGSS) to the United
States Postal Service shall be the amount invoiced between Cepheid and NGSS.

     1.8 “Person” shall mean an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization, governmental authority or any other form of
entity not specifically listed herein.

     1.9 “Licensed Products” shall mean any product, the manufacture, use, sale, offer for
sale, or importation of which, but for the licenses granted herein under this Agreement, would

 

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

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infringe a Valid Claim of the Licensed Patents. Appendix 1 attached hereto provides a list of
the Licensed Products as of the Effective Date of this Agreement.

     1.10 “Licensed GeneXpert Product” shall mean any Licensed Product that contains
Cepheid’s self contained cartridge (also called GeneXpert cartridge) as described and offered by
Cepheid at www.cepheid.com as of the Effective Date of this Agreement and any follow on versions
made thereon. Appendix 2 attached hereto provides a list of the Licensed GeneXpert Products as of
the Effective Date of this Agreement.

     1.11 “Licensed GeneXpert Product Unit” shall mean a single GeneXpert cartridge of
Licensed GeneXpert Product that is designed for a single use to detect the presence or absence of
one or more analytes in a single sample of biological material to be tested.

     1.12 “Territory” shall mean worldwide.

     1.13 “Valid Claim” shall mean a claim of an issued and unexpired patent of the
Licensed Patents 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, or admitted to be
invalid or unenforceable through reissue or disclaimer or otherwise.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

     Each party hereby represents and warrants to the other party as follows:

     2.1 Corporate Existence. Such party is a corporation duly organized, validly existing
and in good standing under the laws of the state in which it is incorporated.

     2.2 Authorization and Enforcement of Obligations. Such party (a) has the corporate
power and authority and the legal right to enter into this Agreement and to perform its obligations
hereunder, and (b) has taken all necessary corporate action on its part to authorize the execution
and delivery of this Agreement and the performance of its obligations hereunder. This Agreement
has been duly executed and delivered on behalf of such party, and constitutes a legal, valid,
binding obligation, enforceable against such party in accordance with its terms.

     2.3 No Consents. All necessary consents, approvals and authorizations of all
governmental authorities and other Persons required to be obtained by such party in connection with
this Agreement have been obtained.

     2.4 No Conflict. The execution and delivery of this Agreement and the performance of
such party’s obligations hereunder (a) do not conflict with or violate any requirement of
applicable laws or regulations, and (b) do not conflict with, or constitute a default under, any
contractual obligation of it.

     2.5 Representation by Abaxis. Abaxis hereby represents and warrants to Cepheid that
as of the Effective Date of this Agreement, (a) Abaxis owns all right, title, and interest in and
to the

 

			
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Licensed Patents and has all necessary rights to grant the license under the Licensed Patents
as set forth in Section ARTICLE 3, (b) Abaxis has received no written notices or claims that the
practice of the Licensed Patents violates, infringes or misappropriates any third party’s
intellectual property rights, and (c) Abaxis does not own or have rights to any patents or patent
applications that are not included in the Licensed Patents and the rights of which are required to
practice the license granted under this Agreement as set forth in Section ARTICLE 3.

     2.6 Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY EXPRESSLY DISCLAIMS, ANY OTHER REPRESENTATIONS OR
WARRANTIES TO THE OTHER PARTY WITH RESPECT TO THE LICENSED PATENTS OR OTHERWISE UNDER THIS
AGREEMENT, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT.

ARTICLE 3

LICENSE GRANT

     3.1 Licensed IP Rights. Subject to the terms and conditions of this Agreement and
during the term of this Agreement, Abaxis hereby grants to Cepheid a non-exclusive,
non-transferable, royalty-bearing license, with the limited right to sublicense solely in
accordance with Section 3.2 herein, under the Licensed Patents to make, have made, import, use,
distribute and sell Licensed Products solely within the Field of Use and within the Territory,
provided that any OEM arrangements other than CSR customers shall only be permitted with prior
written consent by Abaxis and shall be subject to the proposed OEM being licensed under the
Licensed Patents under the terms and conditions negotiated in good faith between the proposed OEM
distributor and Abaxis. For avoidance of doubt, sales of Licensed GeneXpert Products by Cepheid in
the relationship of Cepheid with Applied Biosystems (ABI) shall be considered licensed under this
Agreement. The relationship referred to with ABI is specifically an arrangement whereby ABI
provides wet reagents to Cepheid, which are manufactured into GeneXpert cartridges by Cepheid,
which cartridges are owned by ABI, and which completed cartridges are distributed by Cepheid and
its distributors. Sales by Cepheid under this relationship with ABI shall not be considered an OEM
arrangement under this Agreement.

     3.2 Sublicenses. Unless specifically permitted by Abaxis in writing, Cepheid shall
not grant any sublicenses under the license granted in Section 3.1 to any third party, with the
sole exception of the limited right to grant sublicenses to Cepheid Affiliates in the Field of Use.
Cepheid shall deliver a copy of each permitted sublicense under this Agreement to Abaxis promptly
after execution of the same. Each permitted sublicense shall be subject to the terms and
conditions of this Agreement, except that sublicenses of Affiliates shall not require an up front
license fee or maintenance fees.

     3.3 License to Additional Products. Any product by Cepheid that becomes a Licensed
Product after the Effective Date of this Agreement maybe added to the list of Licensed Products
under Appendix 1 attached hereto via amendment to the Appendix 1, provided that Cepheid notifies
Abaxis of such added Licensed Product in writing and Cepheid hereby agrees that such

 

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

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added Licensed Product is subject to the same royalty term as set forth under Section 4.2 in
this Agreement.

ARTICLE 4

PAYMENTS AND ROYALTIES

     4.1 Initial License Fee. In consideration for the licenses granted to Cepheid herein,
Cepheid shall pay Abaxis [***] on the Effective Date of this Agreement.

     4.2 Royalty Rate. In consideration for the licenses granted to Cepheid herein, during
the term of this Agreement, Cepheid shall pay royalties to Abaxis

     [***]

     4.3 License Maintenance Fee. In consideration for the licenses granted to Cepheid
herein, during the term of this Agreement, Cepheid shall pay Abaxis a license maintenance fee of
[***] per year payable by December 31 of each year; provided that such license maintenance fee is
creditable against any royalties due during such calendar year. Such minimum royalty shall be
prorated for the calendar year of 2005.

ARTICLE 5

ROYALTY REPORTS AND ACCOUNTING

     5.1 Royalty Reports. During the term of this Agreement, Cepheid shall furnish to
Abaxis a quarterly written report showing in reasonably specific detail , (a) the gross sales of
each Licensed Product sold by Cepheid, its Affiliates and its distributors, (except sales by
Cepheid Foreign Distributors and NGSS to the US Postal Service) in the Territory during the
reporting period and the calculation of Net Sales from such gross sales; (b) the royalties payable
in United States dollars, if any, which shall have accrued hereunder based upon Net Sales of each
Licensed Product; (c) the withholding taxes, if any, required by law to be deducted in respect of
such sales; and (d) the exchange rates used in determining the amount of United States dollars.
With respect to sales of Licensed Products invoiced in United States dollars, all amounts shall be
expressed in United States dollars. With respect to sales of Licensed Products invoiced in a
currency other than United States dollars, all amounts shall be expressed in the domestic currency
of the party making the sale together with the United States dollar equivalent. The United States
dollar equivalent shall be calculated using the average of the exchange rate (local currency per
US$1) published in The Wall Street Journal, Western Edition, under the heading “Currency
Trading” on the last business day of each month during the applicable calendar quarter. Reports
shall be due on the sixtieth (60th) day following the close of each quarter. Cepheid shall keep
complete and accurate records in sufficient detail to enable the royalties payable hereunder to be
determined. For the purpose of this Section 5.1 and Section 6.1, the first quarterly royalty
report will cover the period of October 1, 2005 to December 31, 2005.

 

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

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     5.2 Audits.

          5.2.1 Upon the written request of Abaxis and not more than once in each calendar year, Cepheid
shall permit an independent certified public accounting firm of nationally recognized standing
selected by Abaxis and reasonably acceptable to Cepheid, at Abaxis’ expense, to have access during
normal business hours to such of the records of Cepheid as may be reasonably necessary to verify
the accuracy of the royalty reports for any year ending not more than thirty six (36) months prior
to the date of such request. The accounting firm shall disclose to Abaxis only whether or not the
reports are correct and the amount of any discrepancies. No other information shall be shared.

          5.2.2 If such accounting firm concludes that additional royalties were owed during such
period, Cepheid shall pay the additional royalties within thirty (30) days of the date Abaxis
delivers to Cepheid such accounting firm’s written report so concluding. The fees charged by such
accounting firm shall be paid by Abaxis; provided, however, if the audit discloses
that the royalties payable by Cepheid for the audited period are more than one hundred five percent
(105%) of the royalties actually paid for such period, then Cepheid shall pay the reasonable fees
and expenses charged by such accounting firm.

          5.2.3 Cepheid shall include in each permitted sublicense granted by it to its Affiliates
pursuant to this Agreement a provision requiring the Affiliate, to keep and maintain records of
sales made pursuant to such sublicense and to grant access to such records by Abaxis’ independent
accountant to the same extent required of Cepheid under this Agreement. Except for distribution
agreements with Cepheid Foreign Distributors and NGSS, Cepheid shall include in its distribution
agreements with its distributors a provision requiring the distributor to keep and maintain records
of sales made pursuant to such distribution agreement and to grant access to such records by
Abaxis’ independent accountant to the same extent required of Cepheid under this Agreement. Upon
the expiration of thirty six (36) months following the end of any year, the calculation of
royalties payable with respect to such year shall be binding and conclusive upon Abaxis and
Cepheid, its Affiliates and distributors.

     5.3 Confidential Financial Information. Abaxis shall treat all financial information
subject to review under this Section ARTICLE 5 as confidential, and shall cause its accounting firm
to retain all such financial information in confidence under Section ARTICLE 7 below.

ARTICLE 6

PAYMENTS

     6.1 Payment Terms. Royalties shown to have accrued by each royalty report provided
for under Section 5.1 above shall be due on the date such royalty report is due. Payment of
royalties in whole or in part may be made in advance of such due date.

     6.2 Payment Method. Except as provided in this Section 6.2, all payments by Cepheid
to Abaxis under this Agreement shall be paid in United States dollars, and all such payments shall
be originated from a United States bank located in the United States and made by bank wire transfer
in immediately available funds to such account as Abaxis shall designate before such

 

			
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payment is due. Upon Abaxis’ election made in writing not less than thirty (30) days prior to
any payment date, Cepheid shall pay all royalties owing to Abaxis hereunder in the currency in
which such royalties accrued, without conversion into United States dollars.

     6.3 Exchange Control. If at any time legal restrictions prevent the prompt remittance
of part or all royalties with respect to any country in the Territory where the Licensed Product is
sold, payment shall be made through such lawful means or methods as Abaxis reasonably shall
determine.

     6.4 Withholding Taxes. All amounts owing from Cepheid to Abaxis shall be paid by
Cepheid without deduction or withholding for or on account of any present or future tax, levy,
impost, fee, assessment, deduction or charge by any taxing authority. If Cepheid is required by
law to deduct or withhold any taxes, levies, imposts, fees, assessments, deductions or charges from
or in respect of any amount owing from Cepheid to Abaxis, (a) Cepheid shall pay the relevant
taxation authority the minimum amount necessary to comply with the applicable law, (b) Cepheid
shall make such payment prior to the date on which interest or penalty is attached thereto, and (c)
the amount owing from Cepheid to Abaxis shall be increased as may be necessary so that after
Cepheid makes all required deductions or withholdings, Abaxis shall receive an amount equal to the
amount it would have received had no such deductions or withholdings been made. Cepheid, its
Affiliates and distributors shall cooperate with Abaxis to enable Abaxis to claim exemption
therefrom under any double taxation or similar agreement in force and shall provide to Abaxis
proper evidence of payments of withholding tax and assist Abaxis by obtaining or providing, in as
far as possible, the required documentation for the purpose of Abaxis’ tax returns.

ARTICLE 7

CONFIDENTIALITY

     7.1 Confidential Information. During the term of this Agreement, and for a period of
five (5) years following the expiration or earlier termination hereof, each party shall maintain in
confidence all Confidential Information disclosed by the other party, and shall not use, disclose
or grant the use of the Confidential Information except on a need-to-know basis to those directors,
officers, employees, consultants, clinical investigators, contractors, (sub)licensees, distributors
or permitted assignees, to the extent such disclosure is reasonably necessary in connection with
such party’s activities as expressly authorized by this Agreement. To the extent that disclosure
is authorized by this Agreement, prior to disclosure, each party hereto shall obtain agreement of
any such person or entity to hold in confidence and not make use of the Confidential Information
for any purpose other than those permitted by this Agreement. Each party shall notify the other
promptly upon discovery of any unauthorized use or disclosure of the other party’s Confidential
Information.

     7.2 Terms of this Agreement. Except as otherwise provided in Section 7.1 above,
neither party shall disclose any terms or conditions of this Agreement to any third party without
the prior consent of the other party. Notwithstanding the foregoing, prior to execution of this
Agreement, the parties have agreed upon the substance of information that can be used to describe
the terms of this transaction, including a redacted copy of this Agreement for public reporting
purposes

 

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

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and each party may disclose such information, as modified by mutual agreement from time to
time, without the other party’s consent.

     7.3 Permitted Disclosures. The confidentiality obligations contained in this Section
ARTICLE 7 shall not apply to the extent that the receiving party (the “Recipient”) is required (a)
to disclose information by law, order or regulation of a governmental agency or a court of
competent jurisdiction, or (b) to disclose information to any governmental agency for purposes of
obtaining approval to test or market a Licensed Product, provided in either case that the Recipient
shall provide written notice thereof to the other party and sufficient opportunity to object to any
such disclosure or to request confidential treatment thereof. For the purposes of this Section
ARTICLE 7, both Abaxis and Cepheid are the disclosing party and Recipient with respect to the terms
and conditions of this Agreement.

ARTICLE 8

PATENTS

     8.1 Prosecution and Maintenance. Abaxis shall be responsible for and shall control
the preparation, filing, prosecution and maintenance of the Licensed Patents.

     8.2 Enforcement.

     Abaxis, at its sole expense and discretion, shall have the right to determine the appropriate
course of action to enforce the Licensed Patents or otherwise abate the infringement thereof, to
take (or refrain from taking) appropriate action to enforce the Licensed Patents, to control any
litigation or other enforcement action and to enter into, or permit, the settlement of any such
litigation or other enforcement action with respect to the Licensed Patents.

ARTICLE 9

TERMINATION

     9.1 Expiration. Subject to the provisions of Sections 9.2 and 9.3 below, this
Agreement shall expire on the expiration of Cepheid’s obligation to pay royalties to Abaxis under
Section 4.2 above.

     9.2 Termination by Cepheid. Cepheid may terminate this Agreement, in its sole
discretion, upon thirty (30) days prior written notice to Abaxis.

     9.3 Termination by Abaxis. Abaxis may terminate this Agreement upon or after the
material breach of this Agreement by Cepheid if Cepheid has not cured such material breach within
ninety (90) days after written notice thereof by Abaxis.

     9.4 Effect of Expiration or Termination. Expiration or termination of this Agreement
shall not relieve the parties of any obligation accruing prior to such expiration or termination,
and the provisions of Sections 1, 2, 7, 8, 9, 10, 11.1 and 12 shall survive the expiration or
termination of this Agreement.

 

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

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ARTICLE 10

INDEMNIFICATION

     10.1 Indemnification. Subject to Section 10.2 below, Cepheid shall indemnify, defend
and hold harmless Abaxis and its Affiliates and all of their respective directors, officers,
employees, stockholders and agents and their respective successors, heirs and assigns (the
“Indemnitees”) from and against any liability, damage, loss or expense (including reasonable
attorneys’ fees and expenses of litigation) incurred by or imposed upon such Indemnitees, or any of
them, in connection with any third party claims, suits, actions, demands or judgments, including,
without limitation, allegations of personal injury, death and product liability matters, to the
extent arising out of (a) any actions or omissions of Cepheid or its Affiliates in the research,
development, testing, production, manufacture, supply, promotion, import, sale or use of any
Licensed Products, (b) any material breach of this Agreement by Cepheid, or (c) gross negligence or
willful misconduct on the part of Cepheid. All sublicense agreements between Cepheid and its
permitted sublicensees shall include a substantially similar indemnification provision for the
benefit of Abaxis which shall be enforceable directly by Abaxis.

     10.2 Procedure. Abaxis promptly shall notify Cepheid of any claim, demand, action or
other proceeding for which Abaxis intends to claim indemnification. Cepheid shall have the right
to participate in, and to the extent Cepheid so desires jointly with any other indemnitor similarly
noticed, to assume the defense thereof with counsel selected by Cepheid; provided, however, that
Abaxis shall have the right to retain its own counsel, with the fees and expenses to be paid by
Cepheid, if representation of Abaxis by the counsel retained by Cepheid would be inappropriate due
to actual or potential differing interests between Abaxis and any other party represented by such
counsel in such proceedings. Cepheid may not settle or otherwise consent to an adverse judgment in
any such claim, demand, action or other proceeding, that diminishes the rights or interests of
Abaxis without the prior express written consent of Abaxis, which consent shall not be unreasonably
withheld or delayed. Abaxis, its employees and agents, shall reasonably cooperate with Cepheid and
its legal representatives in the investigation of any claim, demand, action or other proceeding
covered by this Section ARTICLE 10.

     10.3 Insurance. Cepheid shall maintain insurance with respect to the research,
development and commercialization of Licensed Products by Cepheid in such amount as Cepheid
customarily maintains with respect to the research, development and commercialization of its
similar products. Cepheid shall maintain such insurance for so long as it continues to research,
develop or commercialize any Licensed Products.

ARTICLE 11

LIMITED RELEASE

     11.1 Limited Release. Except as provided in this Agreement and except for claims or
defenses related to allegations concerning material breaches of this Agreement, which breaches are
not cured within 60 days after notice from Abaxis, and subject to a) Cepheid’s and its Affiliates’
compliance with the terms and conditions of this Agreement, and b) Cepheid not terminating this
Agreement prior to the expiration of any of the Licensed Patents in the absence

 

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

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of any material breach of this Agreement by Abaxis, Abaxis, on behalf of itself and its
Affiliates and assigns, hereby irrevocably releases, remises, discharges and acquits a) Cepheid and
its Affiliates, b) the agents, representatives, officers, employees, managers, directors,
shareholders, attorneys, predecessors of Cepheid and of its Affiliates, and c) ABI, NGSS, and
United States Post Office only with respect to their activities associated with their relationship
with Cepheid in the sale of the Licensed Products to the United States Postal Service, from and
against any and all known or unknown, accrued or unaccrued, legal, equitable or other, liabilities
claims, suits, actions, causes of action, debts, accounts, bonds, damages, expenses, fees, losses,
royalties, or demands in law, equity or otherwise, that are based upon the activities of Cepheid
occurring prior to the Effective Date and related to the making, using, selling, or offering to
sell Licensed Products by Cepheid (“Limited Release”). Abaxis and Cepheid acknowledge that this
release and any related dismissal of claims does not encompass activities of Cepheid occurring
after the Effective Date. Notwithstanding the foregoing, in the event Cepheid, its Affiliates, or
distributors only with respect to distributing Cepheid Licensed Products (excluding NGSS and
Cepheid Foreign Distributors), cease to make, use, sell, or offer to sell any and all Licensed
Products in each and every jurisdiction where there is at least one Valid Claim (“Termination of
Licensed Product”), unless such action is immaterial and is ceased within 30 days after notice from
Abaxis, and consequently Cepheid terminates this Agreement solely for the reason of Termination of
Licensed Product, Cepheid will be entitled to the Limited Release granted in this Section 11.1,
provided that Cepheid does not resume any activity within the scope of a Valid Claim after
Termination of Licensed Product unless such activity is immaterial and is ceased within 30 days
after notice from Abaxis.

     11.2 Dismissal. Within two (2) business days of the Effective Date, Abaxis shall file
with the United States District Court for the Northern District of California a request for final
dismissal without prejudice of the District Court Action, and thereafter take any other steps as
may be necessary to cause the District Court Action to be finally dismissed without prejudice.

ARTICLE 12

MISCELLANEOUS

     12.1 Notices. Any consent, notice or report required or permitted to be given or made
under this Agreement by one of the parties to the other shall be in writing and addressed to such
other party at its address indicated below, or to such other address as the addressee shall have
last furnished in writing to the addressor, and shall be effective upon receipt by the addressee.

	 	 	 
	If to Abaxis:

	 	Abaxis, Inc.
	 

	 	3240 Whipple Road,
	 

	 	Union City, CA, 94587
	 

	 	United States of America
	 

	 	Attn: Kenneth Aron, Vice President of Research & Development
	 

	 	FAX: (510)-441-6150
	 
	If to Cepheid:

	 	Cepheid
	 

	 	904 Caribbean Drive
	 

	 	Sunnyvale, CA 94089
	 

	 	Attn: Legal Department

 

			
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     12.2 Assignment. Except as otherwise expressly provided under this Agreement neither
this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred
(whether voluntarily, by operation of law or otherwise), without the prior express written consent
of the other party; provided, however, that either party may, without such consent, assign this
Agreement and its rights and obligations hereunder in connection with the transfer or sale of all
or substantially all of its business, or in the event of its merger, consolidation, change in
control or similar transaction. Any permitted assignee shall assume all obligations of its
assignor under this Agreement. Any purported assignment or transfer in violation of this Section
12.2 shall be void.

     12.3 Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law principles
thereof.

     12.4 Entire Agreement. This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof. All express or implied representations,
agreements and understandings, either oral or written, heretofore made are expressly superseded by
this Agreement. No amendment or modification hereof shall be valid or binding upon the parties
unless made in writing and signed on behalf of each party.

     12.5 Severability. Should a court of competent jurisdiction later consider any
provision of this Agreement to be invalid, illegal, or unenforceable, it shall be considered
severed from this Agreement and the parties agree to use their best efforts to negotiate a
provision that is consistent with applicable law and accomplishes, as nearly as possible, the
original intention of the parties with respect thereto. All other provisions, rights and
obligations shall continue without regard to the severed provision, provided that the remaining
provisions of this Agreement are in accordance with the intention of the parties.

     12.6 Independent Contractors. Each party hereby acknowledges that the parties shall
be independent contractors and that the relationship between the parties shall not constitute a
partnership, joint venture or agency. Neither party shall have the authority to make any
statements, representations or commitments of any kind, or to take any action, which shall be
binding on the other party, without the prior consent of the other party to do so.

     12.7 Waiver. The waiver by a party of any right hereunder, or of any failure to
perform or breach by the other party hereunder, shall not be deemed a waiver of any other right
hereunder or of any other breach or failure by the other party hereunder whether of a similar
nature or otherwise.

     12.8 Force Majeure. Neither party shall be held liable or responsible to the other
party nor be deemed to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement (other than for the payment of money) to the
extent, and for so long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including but not limited to fire, floods, embargoes, war,
acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes,

 

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

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lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by
any governmental authority or the other party.

     12.9 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

	 	 	 	 	 
	 	 	Abaxis, Inc.
	 
	 	 	 	 
	 

	 	By
	 	/s/ Kenneth Aron
	 

	 	 	 	 
	 

	 	Title
	 	Vice President: Research & Development
	 
	 	 	 	 
	 	 	Cepheid
	 
	 	 	 	 
	 

	 	By
	 	/s/ Joseph H. Smith
	 

	 	 	 	 
	 

	 	Title
	 	Sr. Vice President and General Counsel

 

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

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Appendix 1

Licensed Products

A) [***], including:

1) [***]

2) [***]

3) [***]

4) [***]

5) [***]

6) [***]

7) [***]

8) [***]

9) [***]

10) [***]

11) [***]

12) [***]

13) [***]

14) [***]

15) [***]

B) [***]

C) IVD products: [***]

D) Environmental and Bio-Threat Testings: [***]

(E) [***]

 

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

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Appendix 2

Licensed GeneXpert Products

A) IVD products: [***]

B) Environmental and Bio-Threat Testings: [***]

 

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

14

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