Document:

Exhibit 10.26

 

 

BERKELEY HEARTLAB, INC. AND DIADEXUS, INC.

MASTER
SUPPLY AGREEMENT

 

This Master Supply
Agreement, dated as of November 1, 2007, by and between diaDexus, Inc.
(“diaDexus”) and Berkeley HeartLab, Inc. (“Lab”), sets forth the terms and
conditions upon which diaDexus will sell to Lab, and Lab will purchase, various
products (the “Agreement”).  The parties
agree as follows:

 

A.           In
consideration of Lab purchasing from diaDexus the products specified in the
attached Product Addendum (“Products”) during the term of this Agreement,
diaDexus agrees to sell Products to Lab at the purchase prices set forth in the
attached Product Addendum.  Lab shall use
Products solely for performing in vitro clinical diagnostic testing on human
blood samples (“Permitted Use”).

 

B.             The
parties hereto acknowledge that this Agreement, including the exhibit and
addendum attached hereto, sets forth the entire agreement and understanding of
the parties as to the subject matter hereof and supersedes all prior and
contemporaneous discussions, agreements, and writings with respect hereto with
respect to the subject matter hereof. 
All previous agreements between diaDexus and Lab and Lab’s subsidiaries
will terminate as of December 31, 2006, other than surviving clauses.

 

C.             The
term of the Agreement shall commence on January 1, 2007 and expire on September
30, 2008 (the “Term”), unless extended for an additional three (3) months
by mutual consent in writing or terminated earlier pursuant to Paragraph N or
P.  Expiration or termination of this
Agreement for any reason will not release a party from any obligation that has
accrued prior to the effective date of such expiration or termination.  Paragraphs B, C, E, Q, R, S, T, U, V, W, X
and DD shall survive expiration or termination of this Agreement.

 

D.            diaDexus
shall ship Product(s) to Lab which orders such Product(s) under a
purchase order and which is authorized by the parties under this
Agreement.  Invoices shall be mailed to
the following address:

 

Berkeley
HeartLab, Inc.

Accounts
Payable Department

839
Mitten Road

Burlingame,
CA 94010

 

E.              Lab
shall pay diaDexus within forty-five (45) days after such invoice is received
by Lab.  In addition, Lab shall pay to
diaDexus the [***], as defined in the Product Addendum, in accordance with the
Product Addendum.  All applicable sales
or use taxes are the responsibility of Lab. 
In those states where diaDexus collects local/state sales taxes,
diaDexus will add these taxes to the invoices and after receipt of payment from
Lab, diaDexus shall remit such amounts to the appropriate taxing
authority(ies).  Any payment due and
payable under the terms and conditions of this Agreement made after the date
such payment is due and payable shall bear interest as of the 45th
day after the date such payment was due and payable and shall continue to
accrue such interest until such payment is made at a rate equal to the lesser
of the prime rate as reported by the Chase Manhattan Bank, New York, New York,
on the date such payment is due, plus an additional two percent (2%), or the
maximum rate permitted by law in the State of California. All payments made
under this Agreement shall be made in U.S. dollars, and such payments shall be
made by check or wire transfer to one or more bank accounts to be designated in
writing by diaDexus.  If payments are not
made, then orders will be placed on credit hold.

 

Term: January
1, 2007 - September 30, 2008

 

BHL/diaDexus_070919

 

[***] indicates material that has been omitted pursuant to a request
for confidential treatment. The omitted material has been filed separately with
the Securities and Exchange Commission.

 

1

 

F.              Product
shipment shall be made FOB diaDexus’ domestic supply source.  Products will be shipped to the following
address:

 

Berkeley HeartLab, Inc.

960 Atlantic Ave, Suite #100

Alameda, CA 94501

Attn:  Lab
Manager

510-263-4088

 

G.             Except
as expressly provided herein, neither this Agreement nor any interest hereunder
will be assignable, nor any other obligation delegable, by a party without the
prior written consent of the other, which shall not be unreasonably withheld or
delayed; provided, however, that either party may assign this Agreement without
consent to any successor in interest by way of merger or sale of all or
substantially all of its assets in a manner such that the assignor will remain
liable and responsible for the performance and observance of all such party’s
duties and obligations hereunder. Any purported assignments made in violation
of this Paragraph G shall be null and void.

 

H.            Notices
and other communications permitted or required under this Agreement will be
deemed to be properly given when received by the other party and if given in
writing and either delivered by hand, overnight delivery service, or mailed by
First Class U.S. Mail, postage prepaid, addressed to the applicable party
as follows:

 

	
  diaDexus:

  	
   

  	
  diaDexus, Inc.

  
	
   

  	
   

  	
  343
  Oyster Point Boulevard

  
	
   

  	
   

  	
  South San Francisco, CA
  94080-1913

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  Patrick Plewman

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Lab:

  	
   

  	
  Berkeley
  HeartLab, Inc.

  
	
   

  	
   

  	
  839 Mitten Road

  
	
   

  	
   

  	
  Burlingame, CA 94010

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Michael Mercer

  
	
   

  	
   

  	
   

  	
  Chief Commercial Officer

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Berkeley
  HeartLab, Inc.

  
	
   

  	
   

  	
  839 Mitten Road

  
	
   

  	
   

  	
  Burlingame, CA 94010

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: General Counsel

  

 

I.                 Products
shall be supplied in accordance with a  specification
for identity and quality of the Product as set forth in the PLAC® test Gen3
product insert (the “Specification”). 
The Specifications are considered a performance guaranty and represent
the expectation for the Product’s performance by Lab.  diaDexus shall give Lab a 90-day written
notification of any changes to the Specification.

 

Prior to using a Product
with changes in Specifications, or offering to Lab, Products for the Permitted
Use, diaDexus will, at its sole cost and expense, complete a full method
validation, according to CLSI accepted guidelines and present such data to Lab
for consideration.  Lab may conduct further
validation in collaboration with diaDexus. 
diaDexus shall, at its expense, supply kits, technical services and
samples as reasonably required for such validation testing, and Lab shall
procure necessary equipment and reagents for such. Lab shall also assign
competent trained personnel appropriate for testing the Products.  Lab shall perform the validation testing and
share results and data (which shall be Confidential Information, subject to
Paragraph V) as necessary with diaDexus to ensure that all regulatory and
quality control requirements have been met to mutual satisfaction before
shipment of Product(s) for 

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

2

 

 

Permitted Use.  The performance of Product in the Lab will
ultimately determine the acceptability of Product.  Lab has the right to reject the changes if
Product’s performance is deemed not acceptable.

 

diaDexus will guarantee
to Lab overnight delivery. If a shipment is received in which the Product
appears to have warmed during shipment (indicated by the cold packs being
warm), Lab will test the shipment at its discretion and inform diaDexus.  In such a case, diaDexus will bear the cost
for the return shipment and replacement of such Product.

 

Prior to using a Product
with a new lot number, Lab will perform acceptability studies.  Lab will perform correlation, linearity and
precision studies to determine acceptability using Lab’s established procedures
for these studies.  For the correlation
studies, a minimum of 60 samples spanning the Lab’s assay range for the Product
will be tested in a controlled side-by-side study, minimizing lab and operator
variables, and the average bias between the new Product lot and the previous
Product lot will have to be less than 13%, supported by appropriate statistical
analysis in order to be acceptable by Lab. 
For any analysis that does not meet Lab’s expectations, that analysis
shall be shared with diaDexus. The results of the precision studies must be
<8% CV for “within run/intra-assay precision” and the results of the
linearity studies must meet Lab achieved linearity of <20% average bias for the
obtained values compared to the expected values up to a range of 100-360
ng/mL.  Lab shall inform diaDexus of the
result of the acceptance inspection including the judgment of acceptance or
rejection of all or part of a shipment in writing within ten (10) business
days after the receipt of such shipment of Product.  If Lab fails to notify diaDexus of a
rejection within such ten (10) business day period, the shipment of
Product shall be deemed accepted by Lab. 
For clarity, Lab shall have no right to reject any Product that is not
stored as required by the Specification during the thirty (30) day period
beginning upon Lab’s receipt of Product.

 

In the event that
diaDexus receives a notice of rejection from Lab in accordance with this
Paragraph I, diaDexus, shall use all best efforts to replace any shipment of
such rejected Product within fifteen (15) days  after
receiving Lab’s written notice of rejection. 
Lab shall keep such defective Products at its premises until the earlier
of (a) thirty (30) days or (b) receipt of diaDexus’ instruction for
return or disposal of such defective Products and shall return or dispose of
such defective Products in accordance with such instruction.  If Lab is instructed to (i) return such
defective Products, diaDexus shall assign Lab a return goods authorization
(RGA) number, shall provide shipping instructions for such return and shall
reimburse Lab for any reasonable freight charges associated with such return or
(ii) to dispose of such defective Products, diaDexus shall reimburse
Lab for any costs associated with such disposal.  Notwithstanding anything to the contrary,
diaDexus shall have no obligation to replace any shipment of Product pursuant
to this Paragraph I if such defect occurred after Lab’s receipt of such Product
from diaDexus, unless such defect is of a nature that could not be discovered
during Lab’s acceptability study (such defect shall be referred to as a “Latent
Defect”).  In the event of any Latent
Defect, Lab may revoke its acceptance of such defective Products by providing
written notice thereof to diaDexus within ten (10) days of discovering
such Latent Defect.  Notwithstanding
anything to the contrary in this Agreement, the parties acknowledge that
replacement of defective Products pursuant to this Paragraph I and
indemnification under and pursuant to Paragraph R shall be the sole and
exclusive remedy of Lab for any Product defects, including breach of the
warranty set forth in Paragraph Q.

 

If diaDexus disputes Lab’s right to reject any
shipment of Product as set forth in this Paragraph I, diaDexus shall notify Lab
within twenty (20) days after such rejection. 
Such dispute shall be resolved by a third party, the identity of whom
shall be mutually agreed upon by the parties, and the appointment of whom shall
not be unreasonably delayed by either party. 
The determination of such third party with respect to any shipment of
Product shall be final and binding upon the parties, but only as to the reasons
given by Lab in rejecting the shipment and shall have no effect on any matter
for which such third party did not make a determination.  The fees and expenses of such third party
shall be paid by the party against which the determination is made.

 

Lab shall reasonably
cooperate with diaDexus in the performance of periodic quality control surveys
as requested by diaDexus to ensure that Products are used for the Permitted Use
and meet regulatory requirements.  Lab
hereby agrees to discuss technical performance and collaboratively resolve any
problems with diaDexus technical support personnel, provided that all such
personnel execute reasonable non-disclosure and non-use agreements, as may be
requested by Lab.

 

diaDexus shall provide
competent trained personnel to assist Lab with Technical issues that may arise
from time to time and to address technical issues associated with performance
of the Product.

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

3

 

 

J.                Lab
will provide diaDexus with monthly testing volume reports sorted by [***] in
the Snapshot Report and the Final Report.

 

K.            This
Agreement may not be amended or modified except by written agreement of both of
the parties.

 

L.              diaDexus
will not be liable for any failure to perform under this Agreement due to
strikes, fire, explosion, flood, riot, lock-out, injunction, interruption of
transportation, unavoidable accidents, or inability to obtain supplies at
reasonable prices.

 

M.         In
the event that a Product is unavailable, diaDexus will notify Lab of such
unavailability by written or electronic communication, and diaDexus will,
within the course of fifteen (15) working days, notify Lab of an action plan to
correct the problem.

 

N.            This
Agreement may be terminated by either party with or without cause at any time
with ninety (90) days written notice.

 

O.            Items
defined as Products listed on the Product Addendum or added on the Product
Addendum at a later date will have guaranteed pricing through the term of the
Agreement.

 

P.              If
any term of this Agreement is breached materially by either party and the
parties cannot agree on a resolution, the non-breaching party may terminate
this Agreement if the breach is not cured within 30 days after notice is given
in accordance with Paragraph H.

 

Q.            diaDexus
represents and warrants to Lab that the Products supplied shall (i) not be
adulterated or misbranded by diaDexus within the meaning of the U.S. Food,
Drug, and Cosmetic Act; (ii) be produced in accordance with the U.S. Food,
Drug and Cosmetic Act Quality System Requirements, specifically 21 CFR Part 820;
and (iii) function in accordance with the Specifications supplied by
diaDexus in connection with such Products after inspection and acceptance by
Lab in accordance with Paragraph I; provided that Lab maintains and
stores such Products in accordance with instructions contained in such
documentation.  diaDexus hereby represents
and warrants that, to the best of its knowledge, the practice of any technology
or patents comprising the Product that are licensed hereunder is and will be
free of any infringement of patents of other persons.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS
PARAGRAPH Q, DIADEXUS MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, ANY
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR USE, ANY WARRANTY OF
NON-INFRINGEMENT, ANY WARRANTY OF SAFETY, OR ANY OTHER STATUTORY WARRANTY.  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES
INCURRED BY THE OTHER OR ANY AFFILIATE OR SUBSIDIARY ARISING OUT OF OR RELATED
TO THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.

 

R.             diaDexus
agrees to defend, indemnify, and hold Lab, directors, officers, employees, and
agents wholly harmless from and against third-party claims, losses, lawsuits,
settlements, demands, causes, judgments, expenses, and cost (including
reasonable attorney fees) arising under or in connection with this Agreement
(collectively, referred to as “Claims”) in the event that such Claims are
caused by a) diaDexus’ breach of any of its warranties in this Agreement, b)
the failure of Products to function properly for the Permitted Use by Lab under
this Agreement, c) any gross negligence or willful misconduct of diaDexus, or
d) any other liability resulting from Lab’s use of the Products within the
Permitted Use under this Agreement. 
However, the foregoing rights to indemnity shall not apply to the extent
that such Claims result from Lab’s negligence or willful misconduct, including,
without limitation, the negligence of Lab’s employees, or from the modification
of any Product of diaDexus by Lab or a third party not within diaDexus’s
control or without diaDexus’ express written permission.  The obligation of diaDexus to defend,
indemnify and hold harmless shall also include, but is not limited to, any such
third-party claims, losses, damages, lawsuits, settlements, demands, causes,
judgments, expenses and costs (including reasonable attorney fees) against Lab
which relate in any manner to Lab’s alleged infringement of any property rights
of a third party in or to the Product or licenses under this Agreement.

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

4

 

 

Lab agrees to defend,
indemnify, and hold diaDexus and subsidiaries, directors, officers, employees,
and agents wholly harmless from and against any and all Claims that arise from (i) the
willful misconduct of Lab including, without limitation, modification of any
Product of diaDexus by Lab or a third party not within diaDexus’ control or
without diaDexus’ express written permission; Lab’s gross negligence or willful
misconduct, including, without limitation, the gross negligence of Lab’s
employees.  However, the foregoing rights
to indemnity shall not apply to the extent that such Claims result from
diaDexus’ negligence or willful misconduct including, without limitation, the
negligence of diaDexus’ employees, or from the modification of any Product of
Lab by diaDexus or a third party at diaDexus’ instruction.

 

For purposes of this
Paragraph R, the indemnified party shall give prompt written notice to the
indemnifying party of any suits, claims, or demands by third parties or the
indemnified party that may give rise to any Claim for which indemnification may
be required under this Paragraph R; provided, however, that
failure to give such notice shall not relieve the indemnifying party of its
obligation to provide indemnification hereunder except if and to the extent
that such failure materially affects the ability of the indemnifying party to
defend the applicable Claim.

 

The indemnifying party
shall be entitled to assume the defense and control of any such Claim at its
own cost and expense; provided, however, that the indemnified
party shall have the right to be represented by its own counsel at its own cost
in such matters.  In the event that the
indemnifying party declines to or fails to timely assume control of any such
Claim, the indemnified party shall be entitled to assume such control, conduct
the defense of, and settle such Claim, all at the sole cost and expense of the
indemnifying party.

 

Neither the indemnifying
party nor the indemnified party shall settle or dispose of any Claim in any
manner that would adversely affect the rights or interests of the other party
without the prior written consent of the other party, which shall not be
unreasonably withheld or delayed.  Each
party shall cooperate with the other party and its counsel in the course of the
defense of any Claim, such cooperation to include without limitation using
reasonable efforts to provide or make available documents, information, and
witnesses

 

S.              diaDexus
shall, at its sole cost and expense, obtain and keep in force a policy of
comprehensive general liability insurance with bodily injury, death, and
property damage limits of One Million U.S. Dollars ($1,000,000) per occurrence
and Two Million U.S. Dollars ($2,000,000) in the aggregate and product
liability coverage insurance of One Million U.S. Dollars ($1,000,000) per
occurrence and One Million U.S. Dollars ($1,000,000) in aggregate.

 

T.             diaDexus
acknowledges that Lab has a proprietary interest in its legal and business name
and reputation.  Lab acknowledges that
diaDexus has a proprietary interest in its legal and business name and
reputation as well as the brand name and trademarks of its products.  Therefore, each party agrees that it shall
not use the other party’s name nor shall a party mention or describe this
Agreement or its relationship with the other party in any press release,
advertising, marketing, and promotional materials or other publications or
materials without first obtaining the prior written approval of the other
party.  Without limiting the foregoing,
diaDexus agrees not to use any name or mark of Lab or to quote the opinion of
any of Lab’s employees in any advertising or other publicity, including in
client lists or on diaDexus website, without obtaining the prior written
consent of Lab.

 

U.            Lab
shall label the Product as the PLAC® Test for Lp-PLA2, PLAC® Test,
or Lp-PLA2 on its test requisition order forms. 
If Lab wishes to market the diaDexus Product using the associated marks,
diaDexus hereby grants to Lab a non-exclusive, non-sublicensible license to use
its trademarks solely for the Permitted use.

 

V.             Audit
Rights; (a) Procedure.  Upon the
written request of diaDexus, and not more than once in each calendar year, Lab
will permit an independent auditing firm, e.g., Protiviti, selected by
diaDexus, and reasonably acceptable to Lab, at diaDexus’s expense, to have
access during normal business hours, and upon reasonable prior written notice,
to such of the records of Lab as may be reasonably necessary to verify the
accuracy of any financial information disclosed to diaDexus related to any
calendar quarter’s average net sales price within the preceding one (1) year
of that quarter’s final adjustment.  If
such firm concludes that additional payments were owed during such period, Lab
will pay the additional payments, with interest from the date originally due at
the prime rate, as published in The Wall Street Journal (Eastern U.S. Edition)
on the last business day preceding such date, within thirty (30) days after the
date such firm’s written report is delivered. 
If the amount of the underpayment is greater than five percent (5%) of
the total amount owed, then Lab will in addition reimburse diaDexus for its
reasonable costs related to such audit. (b) Confidentiality. The
independent auditing firm shall be required to maintain all information it
reviews in 

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

5

 

 

confidence, except
that it may report the summary balance of payment results of its audit to
diaDexus.  diaDexus will treat all
information subject to review under this Paragraph V in accordance with the
confidentiality provisions of Paragraph W, and will cause its firm to
enter into non-disclosure, non-use and Business Associate agreements reasonably
acceptable in form and substance to Lab, obligating such firm to retain all
such financial information in confidence and not otherwise use such information
pursuant to such confidentiality agreement. 
(c) Audit Disputes.  If Lab
in good faith disputes the conclusion of the firm under subsection (b) above
that Lab owes additional royalties or other payments, or any specific aspect of
the conclusion, then Lab will inform diaDexus by written notice within thirty
(30) days of receiving a copy of the audit containing such conclusion,
specifying in detail the reasons for Lab’s disputing such conclusion.  The parties will promptly thereafter meet and
negotiate in good faith a resolution to such dispute.  In the event that the parties are unable to
resolve such dispute within thirty (30) days after such notice, the matter will
be resolved pursuant to Paragraph X, and interest will be payable on any
additional payments determined to be due.

 

W.        The
parties have provided to each other prior to entering into this Agreement, and
in connection with this Agreement may in the future provide to each other,
confidential information, including but not limited to each party’s know-how,
invention disclosures, patent applications, proprietary materials and/or
technologies, economic information, business or research strategies, trade secrets,
and material embodiments thereof (“Confidential Information”).  The terms and conditions of this Agreement
shall be Confidential Information of the parties, and subject to the terms of
this Paragraph W.

 

The receiving party shall
maintain the Confidential Information of the disclosing party in confidence,
shall not disclose such Confidential Information to any third party, and shall
not use such Confidential Information for any purpose except as expressly
permitted under the terms and conditions of this Agreement.  Notwithstanding the previous sentence, the
receiving party may disclose the Confidential Information of the disclosing
party to its employees, agents, consultants, and professional, scientific, medical,
and legal advisors who have a need to know such Confidential Information; provided
that any such person to whom disclosure is made is bound by obligations of
non-disclosure and non-use no less restrictive then those set forth
herein.  The receiving party shall take
the same degree of care that such party uses to protect its own confidential
and proprietary information of a similar nature and importance, but in no event
shall such care be less than reasonable care.

 

The obligations of
non-disclosure and non-use under this Paragraph W will not apply as to
particular Confidential Information of a disclosing party to the extent that
such Confidential Information:  (a) is
at the time of receipt, or thereafter becomes, through no fault of the
receiving party, published or publicly known or available; (b) is known by
the receiving party at the time of receiving such information, as evidenced by
written records; (c) is hereafter furnished to the receiving party by a
third party without breach of a duty to the disclosing party; or (d) is
independently discovered or developed by the receiving party without use of,
application of, access to, or reference to Confidential Information of the
disclosing party as evidenced by written records. Both parties shall not,
directly or indirectly, (a) use the Confidential Information to guide or
aid a search and/or evaluation of publicly available information for purposes
of either showing the Confidential Information is in the public domain or to
recreate the knowledge or logic contained within the Confidential Information
from non-protected sources and/or (b) disassemble, reverse engineer or
otherwise use the Confidential Information as a guide or template to otherwise
recreate the logic or knowledge contained within the Confidential Information
and/or to directly or indirectly offer or use a product and/or service that
incorporates or uses the functionality of anything disclosed in the
Confidential Information or substantially equivalent to or substituting for,
any functionality disclosed by the other party in the Confidential Information
of such other party or for any other purpose.

 

Disclosure of
Confidential Information shall not be precluded if such disclosure (i) is
in response to a valid order of a court or other governmental body or (ii) is
required by law or regulation; provided, however, that the
receiving party shall first have given reasonable prior notice to the
disclosing party and shall have made a reasonable effort to obtain a protective
order, or to cooperate with the disclosing party’s efforts, as applicable, to
obtain a protective order limiting the extent of such disclosure and requiring
that the Confidential Information so disclosed be used only for the purposes
for which such order was issued or as required by such law or regulation.

 

The receiving party
agrees that its obligations under this Paragraph W are necessary and
reasonable to protect the disclosing party’s business interests and that the
unauthorized disclosure or use of Confidential Information of a disclosing
party will cause irreparable harm and significant injury, the degree of which
may be difficult to ascertain.  

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

6

 

The receiving party
further acknowledges and agrees that in the event of any actual or threatened
breach of this Paragraph W, the disclosing party may have no adequate remedy
at law and, accordingly, that the disclosing party will have the right to seek
an immediate injunction enjoining any breach or threatened breach of this
Paragraph W, as well as the right to pursue any and all other rights and
remedies available at law or in equity for such breach or threatened breach.

 

All obligations of
non-disclosure and non-use imposed pursuant to the terms and conditions of this
Paragraph W shall survive expiration or termination of this Agreement and
continue in full force and effect for a period of ten (10) years after the
effective date of such expiration or such termination.

 

X.            This Agreement is made in accordance with,
and this Agreement and any dispute arising out of, related to, or in connection
with this Agreement shall be governed and construed under, the laws of the
State of California, United States of
America, without giving effect to any choice of law principles that would
result in the application of the laws of any State other than the State of California.  Any
claim, dispute, or controversy arising out of or in connection with this
Agreement or the breach or alleged breach of this Agreement shall be submitted
for adjudication to the United States District Court, Northern District of California, or in the event that subject matter
jurisdiction does not exist in such Court, to the state court sitting within
the territory of the Northern District of California.  Each party hereby consents to personal
jurisdiction and venue in these courts.

 

Y.             The
relationship of the parties established by this Agreement is that of
independent contractors.  Nothing in this
Agreement shall be constructed to create any other relationship between the
parties.  Neither party shall have any
right, power, or authority to bind the other or assume, create, or incur any
expense, liability, or obligation, express or implied, on behalf of the other
party.  This Agreement is neither
expressly nor impliedly made for the benefit of any party other than those executing
it.

 

Z.             The
failure of a party to enforce any rights or provisions of the Agreement shall
not be construed to be a waiver of such rights or provisions, or a waiver by
such party to thereafter enforce such rights or provision or any other rights
or provisions hereunder.  No trade
customs, courses of dealing or courses of performance by the parties shall be
relevant to modify, supplement, or explain any term(s) used in this
Agreement.

 

	
  AA

  	
   

  	
  If any term, condition
  or provision of this Agreement is held to be unenforceable for any reason, it
  shall be interpreted to achieve the intent of the parties to this Agreement to the extent possible rather than
  voided. In any event, all other terms, conditions, and provisions of this
  Agreement shall be deemed valid and enforceable to the full extent.

  
	
   

  	
   

  	
   

  
	
  BB.

  	
   

  	
  Each party shall carry
  out its activities pursuant to this Agreement in compliance with all
  applicable federal, state, and local laws, rules, regulations, and
  guidelines.

  
	
   

  	
   

  	
   

  
	
  CC.

  	
   

  	
  Upon the execution of
  this Agreement, diaDexus shall simultaneously execute a Business Associate
  Agreement with Lab in a form substantially similar to the one attached hereto
  as Exhibit A.

  
	
   

  	
   

  	
   

  
	
  DD.

  	
   

  	
  This Agreement may be
  executed in counterparts, each of which shall be deemed an original and all
  of which together shall constitute one instrument.

  

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

7

 

 

	
  EE.

  	
   

  	
  To the extent that
  there is any conflict or inconsistency between this Agreement and any
  purchase order, the attached Product Addendum, or any other document
  pertaining to the supply of Product, the terms of this Agreement shall govern
  unless specifically acknowledged and agreed to in writing by each of the
  parties.

  

 

 

	
  Berkeley
  HeartLab, Inc.

  	
   

  	
  diaDexus, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
        /s/
  Frank Ruderman

  	
   

  	
  By:
  

  	
        /s/
  Patrick Plewman

  
	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name: Frank Ruderman

  	
  Patrick
  Plewman

  
	
   

  	
   

  
	
  Title: President

  	
  Title:
  President & CEO

  
	
   

  	
   

  	
   

  
	
  Date: November 9,
  2007

  	
  Date:
  11/16/07

  
						

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

8

 

diaDexus -  Berkeley
HeartLab, Inc.

PRODUCT ADDENDUM

 

	
  Catalog #

  	
   

  	
  Description

  	
   

  	
  Lab Price

  
	
  90106

  	
   

  	
  GEN3 PLAC® Test Kit for
  Lp-PLA2 96-well microplate ELISA kit

  	
   

  	
  [***]

  
	
  90104

  	
   

  	
  GEN3 PLAC® Test
  Controls 2 controls, 1 vial each, 3 mL each

  	
   

  	
  [***]

  

 

Lab will issue a “snapshot”
sales report to diaDexus on or before the 10th calendar day of each
month for the prior month’s expected utilization of Product (the “Snapshot Report”),
delineating between patient reportable results and CRO results.  diaDexus will invoice Lab, using the Lab
Price schedule above, on the 10th calendar day of each month based
on Lab’s Snapshot Report of total Patient and total CRO results from the preceding
month.  Lab will provide a report by the
20th calendar day of each month for the immediate prior month’s
actual utilization of Product (the “Final Report”).  Any difference between the Snapshot Report
and the Final Report will be accounted for in the subsequent month’s
invoice.  For clarification and as an
example only: on or before the 10th calendar day of October, Lab
would issue a Snapshot Report for September’s expected utilization and diaDexus
would immediately invoice.  By October 20th,
Lab would issue a Final Report for September’s actual utilization and any
difference between the Snapshot and Final Reports would be accounted for in the
November 10th invoice.

 

Net Sales Reconciliation*

 

In addition to the
payments set forth above, the parties agree to have a [***], on a quarterly
basis, based on the [***].  

 

Within one hundred
(100) calendar days after the end of each quarter, Lab will reconcile its
payments to diaDexus for the six month period that ends as of the last day of
such quarter (the “Measurement Period”) such that the total amount owed to
diaDexus by Lab for the PLAC test during the Measurement Period will equal the
equivalent of [***] by Lab during the same Measurement Period, including [***];
provided, however, in no event will Lab pay diaDexus less than [***].  If the [***] for the PLAC tests performed
should fall below [***], diaDexus and Lab will [***] on a go-forward
basis.  For example, if the [***] for the
PLAC tests performed the prior quarter is [***], then Lab will pay diaDexus an
additional [***] per each test performed in that quarter [***].

 

Notwithstanding the
foregoing, the first net sales reconciliation for the time period from January
1 through May 31, 2007 was delivered to diaDexus as of the date of this
Agreement and the second net sales reconciliation will be due no later than
October 31, 2007 and will cover the time period June 1 through June 30,
2007.  Subsequent net sales
reconciliations will be due as set forth above. 
diaDexus recognizes that [***] may not be resolved within 100 days from
end of quarter; accordingly [***] quarterly reconciliation may require
adjustment.  Subject to the Measurement
Period limitation set forth above, any such adjustments will be accounted for
in the subsequent quarter’s reconciliation and applied to the most recent
outstanding invoice from diaDexus; provided, however, no such adjustments will
apply to the time period prior to January 1, 2007.  All net sales reconciliation amounts and
reports provided to diaDexus shall be certified for accuracy by a financial
officer of Lab.

 

BHL/diaDexus_070919

 

[***] indicates
material that has been omitted pursuant to a request for confidential
treatment. The omitted material has been filed separately with the Securities
and Exchange Commission.

 

9

 

 

TERMS
AND CONDITIONS AS SET FORTH IN THE MASTER SUPPLY AGREEMENT

SHALL
APPLY TO THIS PRODUCT ADDENDUM

 

	
  Pricing
  Effective

  	
   

  	
  Expires

  
	
  Date:
  January 1, 2007

  	
   

  	
  Date:
  September 30, 2008

  
	
   

  	
   

  	
   

  
	
  Berkeley
  HeartLab, Inc.

  	
   

  	
  diaDexus, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/  Frank
  Ruderman

  	
   

  	
  By:

  	
     /s/
  Patrick Plewman

  
					

 

	
  Print
  Name:

  	
  Frank
  Ruderman

  	
  Patrick
  Plewman

  
	
   

  	
   

  
	
  Title:

  	
  President

  	
  Title:
  President & CEO

  
	
   

  	
   

  
	
  Date:

  	
  November 9,
  2007

  	
  Date:

  	
   

  	
  11/16/07

  	
   

  

 

BHL/diaDexus_070919

 

[***] indicates
material that has been omitted pursuant to a request for confidential
treatment. The omitted material has been filed separately with the Securities
and Exchange Commission.

 

10

 

EXHIBIT A

 

diaDexus-  Berkeley
Heart Lab, Inc.

Business Associate Agreement

 

This Business Associate
Agreement (“Agreement”) is entered into this 1st day of November 2007 (the
“Effective Date”) by and between Berkeley HeartLab, Inc., a California
corporation (“BHL”), and diaDexus, Inc., a Delaware corporation (“Contractor”).

 

RECITALS

 

A.            Pursuant to HIPAA, BHL, as a Covered Entity, as defined
in 45 C.F.R. §160.103, is required to enter into this Agreement to obtain
satisfactory assurances that Contractor, a Business Associate, will
appropriately safeguard all Protected Health Information disclosed, created or
received by Contractor on behalf of, BHL.

 

B.            BHL desires to engage Contractor to perform certain
functions for, or on behalf of, BHL involving the disclosure of PHI by BHL to
Contractor, or the creation or use of PHI by Contractor on behalf of BHL, and
Contractor desires to perform such functions.

 

C.            This contract shall be deemed an amendment to the parties’
Master Supply Agreement dated November 1, 2007 (“Underlying Agreement”).

 

In
consideration of the mutual promises below and the exchange of information
pursuant to this Agreement and in order to comply with all legal requirements
for the protection of this information, the parties therefore agree as follows:

 

Article I. Definitions of Terms

 

1.01         Business Associate shall have the meaning given to
such term in 45 C.F.R. §160.103.

 

1.02         C.F.R. shall mean the Code of Federal
Regulations.  All references to the
C.F.R. are to their then current version.

 

1.03         Designated Record Set shall have the meaning given to
such term in 45 C.F.R. §164.501.

 

1.04                           ePHI shall mean
electronically created, received, maintained or transmitted PHI.

 

1.05         HIPAA shall mean the Health Information Portability
and Accountability Act of 1996, as amended from time to time.

 

1.06         Privacy Laws shall mean HIPAA,
the HIPAA regulations and any other applicable state or federal laws or
regulations affecting or regulating the privacy and/or security of health
information (65 Fed. Reg. 82462-82829 (December 28, 2000 and as amended on
August 14, 2002 in 67 Fed Reg. 53,182-53273 (Part 160 and 164).)).

 

1.07         Protected Health Information (“PHI”) shall have the
meaning given to such term in 45 C.F.R. §164.501 and other applicable state
Privacy Laws.

 

1.08         “Required by Law” shall have the meaning given to
such phrase in 45 C.F.R. §164.501.

 

1.09         Security Rule shall have the meaning given such
term in 45 C.F.R. § 164.302-164.318.

 

BHL/diaDexus_070919

 

[***] indicates material that has been omitted pursuant to a request
for confidential treatment. The omitted material has been filed separately with
the Securities and Exchange Commission.

 

11

 

Article II.               Obligations
of Contractor

 

2.01         HIPAA Obligations.  Contractor acknowledges that federal
regulations relating to the confidentiality of PHI requires Covered Entities
and Business Associates to comply with HIPAA. 
HIPAA requires BHL to ensure that Business Associates who receive
confidential information in the course of providing services on behalf of BHL
comply with certain HIPAA obligations regarding the confidentiality of
PHI.  Accordingly, Contractor shall only
use and/or disclose PHI in a manner consistent with this Agreement, the
Underlying Agreement, the Privacy Rule, the Security Rule or as Required
by Law and only in connection with providing services hereunder.

 

2.02         Permitted Uses and Disclosures.  In connection with the services provided by
Contractor to BHL, Contractor may not use or disclose PHI received or created
pursuant to this Agreement as set forth in this Section 2.  Contractor shall maintain appropriate
safeguards to ensure that PHI is not used or disclosed other than as provided
by this Agreement or as required by Law.  Except
as may be limited by this Agreement, Contractor may use or disclose PHI it obtains or creates in its
capacity as Contractor for the proper management and administration of the
Contractor, to carry out Contractor’s legal responsibilities
under the Underlying Agreement
and this Agreement; provided that any
disclosures are Required by Law.
Contractor shall, if it makes a disclosure as permitted hereunder, (i) provide
training to members of Contractor’s workforce regarding the confidentiality
requirements in the Privacy Laws, the Security Rule and this Agreement;
and (ii) obtain reasonable assurances from the person to whom the information is disclosed that it will remain confidential and used or further disclosed only for the
purpose for which it was disclosed to such person and in accordance with the
Privacy Laws, and such person will notify Contractor of any instances of which it is aware
in which the confidentiality of such PHI has been breached.  Further, Contractor shall ensure that any use or disclosure of PHI are
subject to the principle of “minimum necessary use and disclosure,” i.e., only the PHI that is the
minimum necessary to accomplish the intended purpose of the use, disclosure, or
request may be disclosed.  Notwithstanding anything to the
contrary in this Agreement, Contractor may use PHI to report violations of law
to appropriate federal and state authorities, consistent with 45 C.F.R.
§164.502(j)(1), but only to the extent such reports are required by Law and
provided that (a) a copy of each such report is provided to BHL and (b) a
complete and accurate summary of any oral disclosure is provided to BHL.

 

Contractor shall require the
recipient of any PHI to agree to the same restrictions and conditions that
apply to Contractor under this Agreement as to the PHI, unless BHL agrees to
the contrary in writing with respect to a specific release of information.

 

2.03         Withdrawal of Authorization.  If the use or disclosure of PHI in this
Agreement is based upon an individual’s specific authorization for the use of
his or her PHI, and such individual revokes such authorization in writing, or
the effective date of such authorization has expired, or the authorization is
found to be defective in any manner that renders it invalid, BHL shall notify
Contractor of such revocation, expiration or defect in the authorization and
thereafter, Contractor shall cease the use and disclosure of any such
individual’s PHI except to the extent it has relied on such use or disclosure,
or where an exception under the Privacy Laws expressly applies.

 

2.04         ePHI
Security.  Contractor shall do all
the following:

(a)   Implement
administrative, physical and technical safeguards that reasonably and
appropriately protect the confidentiality, security, integrity and availability
of ePHI that Contractor creates,
receives, maintains or transmits on behalf of BHL, which in any event shall be
no less than the HIPAA-related implementation recommendations of the NIST/URAC/WEDI Health Care Security Workgroup (see www.wedi.org; keyword search “NIST” or “URAC”)
;

 

(b)   Ensure
that any agent, including a subcontractor, to whom Contractor provides ePHI agrees in writing to implement
reasonable and appropriate safeguards to protect ePHI; and

 

BHL/diaDexus_070919

 

[***] indicates material that has been omitted pursuant to a request
for confidential treatment. The omitted material has been filed separately with
the Securities and Exchange Commission.

 

12

 

(c)   Upon
request, make available to BHL Contractor’s documented information security
program, including the most recent ePHI risk analysis, policies, procedures,
security incidents and responses, and evidence of training.

 

2.05         Access to PHI by Individuals.  Contractor shall cooperate with BHL to
fulfill all requests by individuals for access to the individual’s PHI in a
Designated Record Set that are approved by BHL. 
Contractor shall cooperate with BHL in all respects necessary for BHL to
comply with applicable Privacy Laws. 
Because California law requires that copies of requested records be
forwarded to patients within fifteen (15) days of their request, Contractor
agrees to forward any copies requested by BHL for this purpose within 5
business days.  If Contractor receives a
request from an individual for access to PHI, Contractor promptly shall forward
such request to BHL and await BHL’s instructions with respect to denial or
approval of such request.  BHL shall be
solely responsible for determining the scope of PHI and Designated Record Set
with respect to each request by an individual for access to PHI.  Upon instruction from BHL, Contractor shall
deny such individual’s request or fulfill such individual’s request by
providing such individual’s PHI to such individual.  BHL shall reimburse Contractor a portion of
the fee charged by BHL to the individual that is proportional to the amount of
PHI produced by Contractor in relation to the amount of PHI produced by BHL,
less reasonable BHL administrative expenses.

 

2.06         Amendment of PHI. 
As directed and in accordance with the time frames reasonably specified
by BHL, Contractor shall incorporate all amendments or addenda to PHI received
from BHL, pursuant to 45 C.F.R. §164.526 and similar applicable Privacy
Laws.  Within ten (10) business days
following Contractor’s amendment of PHI as directed by BHL, Contractor shall
provide written notice to BHL confirming that Contractor has made the
amendments or addenda to PHI as directed by BHL and containing any other
information as may be necessary for BHL to provide adequate notice to the
individual in accordance with 45 C.F.R. §164.526 and similar applicable Privacy
Laws.

 

2.07.        Disclosure Accounting. In the event that Contractor
makes any disclosures of PHI that are subject to the accounting requirements of
45 C.F.R. §164.528, Contractor promptly shall report such disclosures to BHL.
The notice by Contractor to BHL of the disclosure shall include the name of the
individual, the recipient, and the reason for disclosure, and the date of the
disclosure.  Contractor shall maintain a
record of each such disclosure, including the date of the disclosure, the name
and, if available, the address of the recipient of the PHI, a brief description
of the PHI disclosed and a brief description of the purpose of the disclosure.  Contractor shall maintain this record for a
period of six (6) years and make available to BHL upon request in an
electronic format so that BHL may meet its disclosure accounting obligations
under 45 C.F.R. §164.528.

 

2.08         Reporting and Mitigating Unauthorized Uses and Disclosures
of PHI.  Promptly following its
notice of the same, Contractor shall report to BHL any uses, disclosures or
risks of disclosure of PHI not authorized by this Agreement of which it becomes
aware and, with respect to ePHI, any
security incident, including any attempted or successful unauthorized access,
use, disclosure, modification, or destruction of ePHI or interference with information system operations all
as required by applicable Privacy Laws and applicable state identity theft laws
(e.g., Cal. Civ. Code §1798.82). 
Contractor agrees to mitigate, to the extent practicable, the
deleterious effects of any use or disclosure of PHI not authorized by this
Agreement.

 

2.09         Ownership of Information.  As between Contractor and BHL, all PHI and ePHI shall be deemed owned by BHL unless otherwise agreed in
writing by BHL.  During the term of this
Agreement, Contractor and any authorized subcontractors shall have the right to
use the PHI and ePHI solely for the purposes of
this Agreement.  Contractor and its
agents shall not have the right to de-identify the PHI and/or ePHI unless agreed in writing by BHL.

 

2.10         Internal Practices, Books, and Records.  Contractor shall make available its internal
practices, books, and records relating to the use and disclosure of PHI
received from, created, or received by Contractor on behalf of BHL to the U.S.
Department of Heath and Human Services or his designee for the purpose of
determining BHL’s compliance with 45 C.F.R. pt. 160 and 164, subparts A and E
and amendments thereto.

 

BHL/diaDexus_070919

 

[***] indicates material that has been omitted
pursuant to a request for confidential treatment. The omitted material has been
filed separately with the Securities and Exchange Commission.

 

13

 

2.11         BHL’s Obligations.

 

(a)   BHL shall notify Contractor of any limitation(s) in
its notice of privacy practices of BHL in accordance with 45 C.F.R. § 164.520,
to the extent that such limitation may affect Contractor’s use or disclosure of
PHI.

 

(b) 
BHL shall notify Contractor of any changes in, or revocation of, permission by
individual to use or disclose PHI, to the extent that such changes may affect
Contractor’s use or disclosure of PHI.

 

(c) 
BHL shall notify Contractor of any restriction to the use or disclosure of PHI
that BHL has agreed to in accordance with 45 C.F.R. § 164.522, to the extent
that such restriction may affect Contractor’s use or disclosure of such PHI.

 

2.12         Permitted Requests from BHL.  BHL shall not request Contractor to use or
disclose PHI in any manner that would not be permissible under the Privacy Rule if
done by BHL.

 

Article III.              Term
and Termination

 

3.01         Term.  This Agreement shall commence the Effective
Date and end when one party notifies the other party of its intent to terminate
pursuant to Section 3.02.

 

3.02         Termination. 
Either party to this Agreement may terminate the Agreement upon
provision of thirty (30) days’ prior written notice.

 

3.03         Effects of Termination; Disposal of PHI and/or ePHI. Upon termination of this Agreement, Contractor
shall return to BHL or destroy all PHI and/or ePHI
that Contractor obtained or maintained pursuant to this Agreement on behalf of
BHL, including the PHI and/or ePHI in the
possession of any of Contractor’s agents or affiliates.  If the parties determine that returning or
destroying the PHI is infeasible, Contractor shall provide to BHL notification
of the specific conditions that make return or destruction infeasible.  Contractor shall extend the protections
provided under this Agreement to such PHI and/or ePHI,
and limit further use or disclosure of such PHI and/or ePHI
to those purposes that make the return or destruction of the PHI and/or ePHI infeasible. 
Contractor shall require that its agents, affiliates, subsidiaries and
subcontractors agree to the extension of all protections, limitations and
restrictions required of Contractor hereunder to the extent such agents,
affiliates, subsidiaries or subcontractors are in possession of such PHI and/or
ePHI.  This Section 3.03 shall
survive the termination of this Agreement.

 

Article IV.              Miscellaneous

 

4.01         Notices.  Any
notice required to be given pursuant to the terms and provisions of this
Agreement shall be in writing and may be either personally delivered, sent by commercial;
overnight delivery service or sent by registered or certified mail in the
United States Postal Service, Return Receipt Requested, postage prepaid,
addressed to each party at the addresses which follow or to such other
addresses as the parties may hereinafter designate in writing:

 

	
   

  	
  BHL:

  	
  839 Mitten Road

  	
   

  	
   

  
	
   

  	
   

  	
  Burlingame,
  CA 94010

  	
   

  	
   

  
	
   

  	
   

  	
  Attn:

  	
  General
  Counsel

  	
   

  
						

 

BHL/diaDexus_070919

 

[***] indicates material that has been omitted pursuant to a request
for confidential treatment. The omitted material has been filed separately with
the Securities and Exchange Commission.

 

14

 

 

	
  Contractor:

  	
   

  	
  diaDexus, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
  343 Oyster Point Boulevard

  	
   

  	
   

  
	
   

  	
   

  	
  South San Francisco, CA
  94080-1913

  	
   

  	
   

  
	
   

  	
   

  	
  Attn:

  	
  Patrick Plewman

  	
   

  
	
   

  	
   

  	
   

  	
  Chief Executive Officer

  	
   

  
						

 

Any such notice shall be
deemed to have been given, if mailed as provided herein, as of the date
received.

 

4.02         Amendments. 
This Agreement may, from time to time, be modified or amended in writing
and such written modifications are signed by both parties to this Agreement.

 

4.03         Counterparts. 
This Agreement may be executed in counterparts, any of which is
considered to be an original agreement.

 

4.04         Assignment/Subcontracting.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives, successors and assigns. 
Neither party may assign the rights or obligations under this Agreement
without the express written consent of the other party; provided, however, that
either party may assign this Agreement without such consent to any permitted
assignee of such party’s rights and obligations under the Underlying Agreement.

 

4.05         Construction. 
This Agreement shall be construed as broadly as necessary to implement
and comply with the HIPAA regulations. 
The parties agree that any ambiguity in this Agreement shall be resolved
in favor of a meaning that complies and is consistent with the HIPAA
regulations.

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this agreement to be
effective as of the date of the Underlying Agreement.

 

	
  BHL

  	
   

  	
  CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Frank
  Ruderman

  	
   

  	
  Patrick
  Plewman

  
	
   

  	
   

  	
   

  
	
  Title:
  President

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Date:
  November 9, 2007

  	
   

  	
  Date:

  	
  11/16/07

  

 

BHL/diaDexus_070919

 

[***] indicates material
that has been omitted pursuant to a request for confidential treatment. The
omitted material has been filed separately with the Securities and Exchange
Commission.

 

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Exhibit 10.48    
    

 
 

EMPLOYMENT AGREEMENT    
    

        This Employment Agreement is entered into by and among AMC ENTERTAINMENT INC., a Delaware corporation
("AMCE"), AMC ENTERTAINMENT INTERNATIONAL, INC., a Delaware corporation ("AMCEI" and, collectively with AMCE, the "Company"), and  MARK A. MCDONALD
("Employee"). In consideration of the mutual promises and covenants contained herein, the parties hereto agree as follows: 

        1.     Duties.    During the Term (as defined in Section 2) of his employment by the Company under this
Agreement, Employee shall devote his full time and attention to the business of the Company as directed by AMC's President and Chief Operating Officer or such officer's designee. 

        2.     Term.    The term of this Agreement shall commence as of July 1, 2001 and shall terminate on
June 30, 2003 or sooner as provided in Section 6 below (such period, as it may be extended, the "Term"). On each July 1 hereafter, commencing in 2002, one year shall be added to
the Term of Employee's employment with the Company under this Agreement, so that as of each July 1 the Term of Employee's employment hereunder shall be two (2) years. 

        3.     Compensation.

        (a)   Base Salary.    During the Term of his employment by the Company under this Agreement, Employee shall receive
an annual salary of $225,000.00 ("Base Salary") (less withholding for applicable taxes), payable in accordance with the Company's payroll procedures for its salaried employees, subject to such
increases as may be determined by AMC's President and Chief Operating Officer with approval from AMCE's Chairman of the Board, President and Chief Executive Officer and, if applicable, the
Compensation Committee of the Board of Directors of AMCE. 

        (b)   Bonus.    In addition to Base Salary, Employee shall be eligible to "receive an annual bonus (the "Bonus") as
determined from time to time by AMC's President and Chief Operating Officer with approval from AMCE's Chairman of the Board, President and Chief Executive Officer and, if applicable, the Compensation
Committee of the Board of Directors of AMCE, based on the Company's applicable incentive compensation program, as such may exist from time to time. 

        (c)   Benefits.    During the Term of Employee's employment by the Company under this Agreement, Employee also shall
be eligible for the benefits offered by the Company from time to time to the Company's other executive officers (such as group insurance, pension plans, thrift plans, stock purchase plans and the
like). Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs it may adopt from time to time. 

        (d)   Automobile.    During the Term of Employee's employment by the Company under this Agreement, the Company shall
provide Employee with a Company owned or leased automobile or an equivalent automobile allowance. 

        4.     Expense Reimbursements.    During the Term of Employee's employment by the Company under this Agreement, the
Company shall reimburse Employee for business travel and entertainment expenses reasonably incurred by Employee on behalf of the Company in accordance with the Company's procedures, as such may exist
from time to time. 

        5.     Termination.    Employee's employment by the Company under this Agreement shall be terminated upon the earliest
to occur of the following events: 

        (a)   Resignation.    Employee's resignation or other voluntary departure. 

        (b)   Death.    The death of Employee. 

 

        (c)   Disability.    If, as a result of Employee's incapacity due to physical or mental illness, (i) Employee
shall not have been regularly performing his duties and obligations hereunder for a period of one hundred twenty (120) consecutive days (a "Disability"), (ii) the Company has given
Employee the written Notice of Termination pursuant to Section 6(a) hereof, and (iii) within thirty (30) days after the Company gives Employee such written Notice of Termination
(which may occur before or after the end of such 120 day period), Employee shall not have returned to the performance of his duties and obligations hereunder on a regular basis. 

        (d)   Cause.    Employee is terminated for Cause. For purposes of this Agreement, "Cause" is defined as
(i) the willful and continued failure by Employee to perform substantially his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental
illness), or (ii) the willful engaging by Employee in misconduct which is materially and demonstrably injurious to the Company. For purposes of this Agreement, no act, or failure to act, on the
part of Employee shall be considered "willful" unless such act was committed, or such failure to act occurred, in bad faith and without reasonable belief that Employee's act or failure to act was in
the best interests of the Company. 

        (e)   Without Cause.    The employment of Employee by the Company under this Agreement may be terminated without
Cause with severance at any time by AMC's President and Chief Operating Officer with approval from AMCE's Chairman of the Board, President and Chief Executive Officer in their sole discretion. In the
event of payment of severance without Cause, Employee shall receive the severance amount specified in paragraph 7(c) herein and in such case, Employee will not receive severance under the AMC
Severance Pay Plan. 

        (f)    Change of Control.    Employee terminates his employment by the Company hereunder due to the occurrence of any
one or more of the events described in clauses (i), (ii) and (iii) below subsequent to a Change of Control (as defined below), provided that Employee has given the Company the
written Notice of Termination pursuant to Section 6(a) hereof within sixty (60) days of the occurrence of any such event: 

        (i)    a
substantial adverse alteration in Employee's responsibilities from those in effect immediately prior to the Change of Control; 

        (ii)   a
reduction in Employee's Base Salary below the rate that is in effect immediately prior to the Change of Control; or 

        (iii)  a
material reduction in the benefits provided to Employee by the Company prior to the Change of Control. 

        For
purposes of this Agreement a "Change of Control" means (i) a merger, consolidation or similar transaction involving the Company after which holders of the Company's stock
before such transaction do not own at least 50% of the combined voting power of all shares generally entitled to vote in the election of the members of the Board of Directors of the surviving entity,
(ii) the acquisition by any person or group (other than Apollo or the holders of Class B Stock on the Initial Issuance Date), so long as neither Apollo nor such holders of Class B
Stock is a part of such group (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder), of beneficial ownership
of at least 50% of the combined voting power of all shares generally entitled to vote in the election of the members of the Board of Directors of the Company, or (iii) the sale of all or
substantially all of the assets of the Company or similar transaction (the determination of aggregate voting power to recognize that the Company's Class B Stock has ten votes per share and the
Company's Common Stock has one vote per share). 

        "Apollo"
means Apollo Management IV, L.P., Apollo Management V, L.P. and their affiliates. 

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        "Class B
Stock" means the Class B Stock, par value $0.662/3 per share, of the Company. 

        "Common
Stock" means the Common Stock, par value $0.662/3 per share, of the Company. 

        "Initial
Issuance Date" means April 19, 2001, the first date of issuance of the Preferred Stock (as defined in the Investment Agreement described below, which is incorporated
herein by this reference) pursuant to the closing of the Investment Agreement. 

        "Investment
Agreement" means the Investment Agreement entered in as of April 19, 2001 among the Company and certain investors named therein. 

        (g)   Retirement.    The retirement of the Employee at or after age 65. 

        6.     Termination Procedure.

        (a)   Notice of Termination.    Any termination of the Company's employment of Employee, either by the Company or by
Employee (other than termination pursuant to Section 5(a) or (b) hereof), shall be
communicated by written Notice of Termination to the other party hereto in accordance with Section 11. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and shall, where applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee under the provisions so indicated. 

        (b)   Date of Termination.    "Date of Termination" shall mean (i) if Employee's employment by the Company is
terminated by Employee's resignation, retirement or other voluntary departure, the date of such event, (ii) if Employee's employment by the Company is terminated by his death, the date of
death, (iii) if Employee's employment by the Company is terminated pursuant to Section 5(c) hereof, thirty (30) days after Notice of Termination is given (provided that Employee
shall not have again become available for service to the Company on a regular basis during such thirty (30) day period), (iv) if Employee's employment by the Company is terminated for
Cause, the date specified in the Notice of Termination, and (v) if Employee's employment by the Company is terminated for any other reason, the date on which a Notice of Termination is given. 

        7.     Compensation During Disability or Upon Termination.

        (a)   During Disability.    During any period that Employee fails to perform his duties under this Agreement as a
result of incapacity due to physical or mental illness (a "disability period"), Employee shall continue to receive his Base Salary at the rate then in effect for such period until his employment by
the Company is terminated pursuant to Section 5(c) hereof, provided that payments so made to Employee during the first 180 days of any such disability period shall be reduced by the sum
of the amounts, if any, paid to Employee at or prior to the time of any such payment under disability benefit plans of the Company or under the Social Security disability insurance program, and which
amounts were not previously applied to reduce any such payment. Employee shall also receive a pro rata portion of the Bonus described in Section 3(b) pursuant to the Company's applicable
incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level (or if there is no target level, at 50% of the Base Salary at the rate then in effect)
was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the denominator of which is 12), as such may exist from time
to time. 

        (b)   Termination for Employee Resignation, Cause or Retirement.    If Employee's employment by the Company is
terminated pursuant to Section 5(a), (d) or (g), the Company shall pay Employee his accrued but unpaid Base Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, and the Company shall have no further obligations to Employee under this Agreement. If Employee's employment by the Company is terminated by Employee's retirement,
Employee shall also receive a pro rata portion of the Bonus described in 

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Section 3(b)
pursuant to the Company's applicable incentive compensation program (the amount of such pro rated Bonus to be determined as though the target level (or if there is no target level,
at 50% of the Base Salary at the rate then in effect) was attained, multiplied by a fraction, the numerator of which is the number of completed months in the then current Bonus program year and the
denominator of which is 12), as such may exist from time to time. 

        (c)   Termination for Death, Disability, Without Cause or by Employee due to a Change of Control. If Employee's employment by
the Company is terminated pursuant to Section 5(b), (c), (e) or (f), the Company shall pay to Employee or his personal representative a lump sum amount equal to two years Base Salary
(less withholding for applicable taxes) of Employee in effect on the Date of Termination. 

        8.     Confidentiality.    Employee acknowledges that he knows and in the future will know information relating to the
Company and its affiliated companies and their respective operations that is confidential or a trade secret. Such information includes information, whether obtained in writing, in conversation or
otherwise, concerning corporate strategy, intent and plans, business operations, pricing, costs, budgets, equipment, the status, scope and term of pending acquisitions, negotiations and transactions,
the terms of existing or proposed business arrangements, contracts and obligations, and corporate and financial reports. Such confidential or trade secret information shall not, however, include
information in the public domain unless Employee has, without authority, made it public. 

        Employee
shall (a) not disclose such information to anyone except in confidence and as is necessary to the performance of his duties for the Company, (b) keep such
information confidential, (c) take appropriate precautions to maintain the confidentiality of such information, and (d) not use such information for personal benefit or the benefit of
any competitor or any other person. 

        Upon
termination of his employment by the Company under this Agreement, Employee shall return all materials in his possession or under his control that were prepared by or relate to the
Company or its affiliates, including, but not limited to, materials containing confidential information, files, memorandums, price lists, reports, budgets and handbooks. 

        Employee's
obligation under this Section 8 shall survive the termination of Employee's employment by the Company under this Agreement. 

        9.     Equitable Remedies.    The parties acknowledge that irreparable damage will result to the Company from any
violation of Section 8 above by Employee. The parties expressly agree that, in addition to any and all remedies available to the Company for any such violation, the Company shall have the
remedy of restraining order and injunction and any such equitable relief as may be declared or issued to enforce the provisions of Section 8 above and Employee agrees not to claim in any such
equitable proceeding that a remedy at law is available to the Company. Notwithstanding anything contained herein to the contrary and if, and only if, any provision of the type contained in
Section 8 above, as the case may be, is enforceable in the jurisdiction in question, if any one or more of the provisions contained in such section shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the
applicable law in such jurisdiction as it shall then appear. 

        10.   Successors: Binding Agreement.

        (a)   Company Successors.    The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all the business of the Company, by agreement in form and substance satisfactory to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 

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        (b)   Employee's Successors.    This Agreement and all rights hereunder shall be binding upon, inure to the benefit
of and be enforceable by Employee's personal or legal representatives and heirs. 

        11.   Notices.    All notices, requests, demand or other communications under this Agreement shall be in writing
addressed as follows: 

        (a)   If
to the Company, to: 

Raymond
F. Beagle, Jr.

Lathrop & Gage L.C.

2345 Grand Boulevard

Kansas City, Missouri 64108 

        (b)   If
to Employee, to: 

Mark
A. McDonald

5812 West 148th Place

Overland Park, Kansas 66223 

        Any
such notice, request, demand or other communication shall be effective as of the date of actual delivery thereof. Either party may change such notice address by written notice as
provided herein. 

        12.   Total Compensation.    The compensation to be paid to Employee under this Agreement shall be in full payment
for all services rendered by Employee in any capacity to the Company or any affiliate of the Company. 

        13.   Additional Potential Compensation.    Nothing in this Agreement shall prohibit the Company from awarding
additional compensation to Employee if it is determined that such compensation is warranted based on Employee's performance. 

        14.   Other Provisions.    This Agreement shall be governed by the laws of the State of Missouri. This Agreement
represents the entire agreement of the parties hereto and shall not be amended except by a written agreement signed by all the parties hereto. This Agreement supersedes any prior oral or written
agreements or understandings between the Company or any affiliate of the Company and Employee. This Agreement shall not be assignable by one party without the prior written consent of the other party,
except by the Company if it complies with Section 10 above. In the event one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement or any other application thereof shall not in any way be affected or impaired
thereby. Section headings herein have no legal significance. 

        15.   Arbitration.    Any legal dispute related to this Agreement and/or any claim related to this Agreement, or
breach thereof, shall, in lieu of being submitted to a court of law, be submitted to arbitration, in accordance with the applicable dispute resolution procedures of the American Arbitration
Association. The award of the arbitrators shall be final and binding upon the parties. 

        The
parties hereto agree that (i) three arbitrators shall be selected pursuant to the rules and procedures of the American Arbitration Association, (ii) at least one
arbitrator shall be a licensed attorney, (iii) the arbitrators shall have the power to award injunctive relief or to direct specific performance, (iv) each of the parties, unless
otherwise provided by applicable law and procedures, shall bear its own attorneys'
fees, costs and expenses and an equal share of the arbitrators' and administrative fees of arbitration, and (v) the arbitrators shall award to the prevailing party a sum equal to that party's
share of the arbitrators' and administrative fees of arbitration. 

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        Nothing
in this section shall be construed as providing Employee a cause of action, remedy or procedure that Employee would not otherwise have under this Agreement or the law. Employee
understands that in signing this Agreement he is waiving any right that he may have to a jury trial or a court trial of any legal dispute or claim as set forth above. 

        THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

        IN
WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. 

	 	 	AMC ENTERTAINMENT INC.,

a Delaware corporation
	

 	
 	

By:	

/s/  PETER C. BROWN      
 Peter C. Brown, Chairman of the Board,

President and Chief Executive Officer
	

 	
 	
AMC ENTERTAINMENT INTERNATIONAL, INC.,

a Delaware corporation
	

 	
 	

By:	

/s/  PHILIP M. SINGLETON      
 Philip M. Singleton, President and

Chief Operating Officer
	

 	
 	

/s/  MARK A. MCDONALD      
MARK A. MCDONALD, EMPLOYEE

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QuickLinks

Exhibit 10.48

EMPLOYMENT AGREEMENT

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