Supply And Distributorship Agreement

EXHIBIT 10.26
Supply and Distributorship Agreement


This Agreement is entered into and effective as of October 26, 2001 ("Effective Date"), by and between ACLARA BioSciences, Inc. having its principal place of business at 1288 Pear Ave., Mountain View, CA 94043 ("ACLARA"), and Roche Diagnostics Corporation, having its principal place of business at 9115 Hague Road, Indianapolis, Indiana 46250 ("Roche"). Roche and ACLARA are collectively referred to as "Parties" and individually as "Party".


WITNESSETH:


WHEREAS, Roche and its Affiliates are in the business of developing, making and selling throughout the world various biochemical and medical products for research, diagnostics, and other purposes.


WHEREAS, ACLARA is engaged in the business of developing microfluidic systems, chips and chemistries which are also often referred to as "lab-on-chip" technology.


WHEREAS, Roche desires to purchase, and be the exclusive distributor, and ACLARA desires to sell to Roche and to appoint Roche as the exclusive distributor of the Products (as defined herein) in accordance with the provisions of this Agreement. In addition, Roche desires to acquire, and ACLARA desires to grant to Roche, for a limited time period, exclusive first rights of refusal and the right to negotiate to become a purchaser/licensee and the exclusive distributor of certain Additional Products (defined below) developed by ACLARA.


NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:


1) Definitions:


1.1 "Affiliate(s)" shall mean any other entity currently controlling, controlled by or under common control with Roche or ACLARA, which in the case of Roche shall include, without limitation, Roche Diagnostics GmbH. "Control" means that more than fifty (50%) of the controlled entity's shares of ownership interest representing the right to make decisions for such entity are owned or controlled, directly or indirectly, by the controlling entity. An entity is considered to be a related company only so long as such ownership or control exists.


1.2 "Ordering Entity" shall mean an Affiliate or any other entity designated by Roche and approved by ACLARA to purchase Product pursuant to the terms of this Agreement.


Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


Confidential Page 1 3/28/02


1.3 "Products" shall mean ACLARA's Arteas-96 and Arteas-384 products, and including all future or next generation versions of these Arteas-96 and Arteas-384 products developed by ACLARA which are sub-microliter in scale and incorporate means for evaporative compensation, packaged and labeled for Roche, as detailed in the Specification which is attached hereto as Exhibit B, but excluding any products which include means for separation of fluids or compounds, including, without limitation, electrophoretic separation or isoelectric focusing.


1.4 "Specification" shall mean the Roche specification for the Product attached hereto and incorporated by reference as Exhibit B.


1.5 "Exclusive" status as a distributor or "Exclusive" shall mean that subject to the terms and conditions of this Agreement, Roche's rights to market, distribute and sell the Products within the Territory are sole and entire and operate to exclude all others.


1.6 "Territory" shall mean worldwide.


1.7 "First Sales Year" shall mean the period commencing on the date of launch of Product by Roche and ending one (1) year thereafter.


1.8 "FTEs" shall mean full time employee equivalents of labor, based on a standard work day. One FTE shall be one person working one day, or eight hours worked collectively by more than one person. One FTE for a year shall be one person working each day in a year, exclusive of holidays and vacation time determined in accordance with ACLARA's and Roche's, as the case may be, customary practices and procedures. FTE's may be performed by employees, consultants, contractors or other persons paid for by ACLARA or Roche.


1.9 As used above and in Section 6.15, the following terms shall mean:


1.9.1 "Arteas [ * ] Product" means [ * ]


1.9.2 "eTag Microfluidic Assay System" means [ * ]


1.9.3 "Additional Products" shall singly or collectively refer to
[ * ]


2) Confidential Information:


2.1 CONFIDENTIALITY OBLIGATIONS. For a period of [ * ] from the date of disclosure, ACLARA and Roche agree to (i) hold all Confidential Information (defined below) in trust and confidence for the disclosing party, (ii) not to disclose Confidential Information to parties other than its Affiliates and contractors or agents, and (iii) not to use such Confidential Information other than for the performance of such Party or its Affiliates or


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[*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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contractors or agents under this Agreement. "Confidential Information" means (a) information that relates to the disclosing party's past, present and future efforts in research, development, manufacturing, and business activities that is disclosed to or obtained by the receiving party in connection with, and during the term of, this Agreement and (b) all items prepared or submitted by the disclosing party that are the property of the other party under the terms of this Agreement, including drafts and associated materials. All Confidential Information shall be in written, graphic, photographic or other tangible form and marked "Confidential", and information disclosed orally shall be confirmed in written summary form marked "Confidential" within thirty (30) days after its disclosure to the receiving party.


2.2 EXCEPTIONS. Any other provision hereof to the contrary notwithstanding, it is expressly understood and agreed by the Parties hereto that the obligations of confidence herein assumed shall not apply to any information which:


a. can be shown by the receiving party to have been in its
possession prior to disclosure to it by the transmitting party;


b. at the time of the disclosure hereunder is, or thereafter
becomes, through no fault of the receiving party, part of
the public domain by publication or otherwise;


c. is furnished to the receiving party by a third party after the
time of disclosure hereunder as a matter of right and
without restriction on its disclosure; or


d. is independently developed by employees, agents or vendors of
the receiving party who have not had access to the
Confidential Information received from the disclosing party.


3) Purchase Orders:


During the term of this Agreement, from time to time Roche (or the Ordering Entity) may issue purchase orders containing instructions for specific performance under this Agreement. Roche will accept only that specific performance that has been pre-authorized, as evidenced by a purchase order, the form and terms of which shall be mutually agreed (in the event of any inconsistency between the terms of this Agreement and any purchase order, the terms of this Agreement shall prevail). The purchase order number should always be referenced on packing slips (bill of lading) and invoices for Product(s).


4) Price:


4.1 The Parties agree that the price is as established in attached Exhibit A, "Pricing". The Pricing detailed in Exhibit A shall represent the price terms through the Initial Term of this Agreement. Subsequent to the Initial Term, pricing shall be the result of good


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faith negotiations between the Parties. Payment shall be due thirty (30) days after receipt of invoice.


4.2 PROMOTIONAL ITEMS. ACLARA shall provide to Roche up to [ * ] Products per year, on a schedule to be designated by Roche, at no charge for promotional purposes. Promotional Products, not to exceed an additional [ * ] per year of each, can be purchased at [ * ] of ACLARA's fully burdened Manufacturing Costs for such promotional Products. "Manufacturing Costs" shall mean [ * ]


5) Term and Termination:


5.1 INITIAL TERM AND EXTENSIONS. The "Initial Term" of this Agreement shall begin on the Effective Date and shall continue for 3 years. Subsequent to the Initial Term, this Agreement shall be automatically extended thereafter for one (1) year periods unless notice of intention not to extend this Agreement is communicated in accordance with Section 13.7 at least six (6) months prior to the then current expiration date. Upon expiration of the Initial Term or any subsequent one year extension term, ACLARA shall be entitled to (a) reasonable termination charges for costs incurred up to the date of expiration by ACLARA for outstanding orders of Product by Roche or other Ordering Entity, (b) share [ * ] in the course of its performance under this Agreement, (c) a transfer of all rights in promotional materials, internet content, samples, customer lists, and marketing material relating to Product which are developed by Roche and its Affiliates in the course of its performance under this Agreement, (d) the right to negotiate in good faith a world-wide license, with the right to sublicense, to rights in trademarks used in connection with marketing and sale of Product, and (e) the right to negotiate in good faith with Roche to obtain [ * ], provided that ACLARA shall disclose such Confidential Information to any third party under terms of confidentiality that are at least as strict as those provided in Article 2 above.


5.2 TERMINATION FOR CAUSE. Either Party may terminate this Agreement for cause by providing the other with sixty (60) days' written notice. Cause shall mean a material breach of a material term of this Agreement, that is not cured by the breaching party as quickly as possible, but in no event longer than the sixty (60) day notice period. If such breach is not cured prior to the sixty (60) day notice period, the non-breaching Party will be left with all remedies at law or equity in addition to its right to terminate.


5.3 TERMINATION WITHOUT CAUSE. Commencing [ * ] after the Effective Date, Roche reserves the right to terminate this Agreement without cause by providing [ * ] written notice to ACLARA. For termination without cause, ACLARA shall be entitled to (a) reasonable charges for costs incurred up to the date of termination, (b) share [ * ] in the course of its performance under this Agreement, (c) a transfer of all rights in promotional materials, internet content, samples, customer lists, and marketing material relating to Product which are developed by Roche and its Affiliates in the course of its


- ----------------------------- [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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performance under this Agreement, (d) the [ * ], and (e) the right to negotiate in good faith with Roche to obtain [ * ], provided that ACLARA shall disclose such Confidential Information to any third party under terms of confidentiality that are at least as strict as those provided in Article 2 above.


5.4 IMPACT ON CONFIDENTIAL INFORMATION. Subject to the terms of Section 5.1 above, the Parties agree that in the event of termination or expiration of this Agreement, all Confidential Information which is the property of Roche or ACLARA, shall be promptly returned to the disclosing Party, except that one copy thereof may be maintained in the file of the receiving Party's Law Department to document information disclosed by the other Party.


6) Supply Arrangements:


6.1 DILIGENCE OBLIGATIONS. Roche will maintain its right to be the exclusive distributor of Product under this Agreement by its compliance with the following diligence requirements set forth in Subsections 6.1.1 through 6.1.4 below. In the event that Roche does not meet any of the following requirements, ACLARA at its option, shall have the right to either convert Roche's distribution rights from an exclusive to a non-exclusive status or provide notice of termination in accordance with the terms of Section 5.2 above.


6.1.1 Within sixty (60) days after the Effective Date, the Parties shall
agree upon, and attach to this Agreement, a detailed Work Plan,
including Milestone Dates, for Roche's commercialization of Product,
including both the Arteas-96 Product and the Arteas-384 Product,
including, without limitation, sales training, technical support and
assay support for miniaturization; and Roche shall use reasonable
efforts to commercialize Product in accordance with the Work Plan and
the Milestone Dates set forth therein.


6.1.2 The Parties agree that the Work Plan for commercialization shall
require Roche to commit the following minimum resources for Arteas-96
Product and Arteas-384 Product: one (1) marketing manager; and one (1)
project manager (technical); the marketing manager and project manager
shall be part-time in calendar year 2001 and full time in calendar year
2002 and thereafter. Assay and technical support will be available in
the U.S. and Europe (with a Work Plan supplement for Japan), and one
hundred percent (100%) of the worldwide key account sales managers
(focused on pharmaceutical and biotech companies) will be trained on
Product. During the First Sales Year, ACLARA will miniaturize assays
for Roche's customers, and will be compensated for this activity
through the Transfer Price paid by Roche for Product, with the
mechanism set forth in Section 6.4 below. With regard to the period
after the First Sales Year, the Work Plan will put in place a mutually
agreed upon plan for assay support consistent with actual sales and
projected sales growth.


- -------------------------- [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


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6.1.3 During the First Sales Year, Roche shall use reasonable efforts to sell
Product and its compliance with this diligence requirement shall be
determined by its actual sales and reasonable penetration of Product
into the High Throughput Screening market.


6.1.4 For each subsequent twelve-month period after the First Sales Year,
Roche shall use reasonable efforts to sell Product and its compliance
with this diligence requirement shall be determined by Roche generating
[ * ]


6.2 EXCLUSIVITY OBLIGATIONS. The Parties agree that for the term of this Agreement, and subject to the other terms and conditions set forth herein, (a) ACLARA shall supply the Product exclusively to Roche and utilize Roche as its exclusive distributor for the Products and (b) Roche shall not develop or sell any other sub-microliter product including means for evaporative compensation that directly competes with the Products for the drug screening market. Roche shall purchase from ACLARA the Products at the prices set forth in Exhibit A to this Agreement, attached hereto and incorporated herein by reference. Roche is under no obligation to purchase a minimum quantity of Products except as specifically set forth in Sections 6.1, 6.5, and 6.12 below during either the Initial Term or any renewal term of this Agreement. [ * ]


6.3 TRANSFER OF EXPERTISE TO ROCHE.


6.3.1 TRANSFER OF SALES/MARKETING EXPERTISE. Subject to the
confidentiality terms above and to the terms of ACLARA's agreements
with third parties regarding, among other matters, assays, dispensers
and materials developed by the third parties and/or ACLARA, ACLARA
will, at no additional cost to Roche, transfer to Roche its body of
expertise that directly relates to sales and marketing of the Product,
including expertise regarding use of the Product, customer
segmentation, customer list, marketing materials, internet content,
samples, presentations, sales tools, assay miniaturization, and
qualifying dispensers , knowledge of which is instrumental to sales and
marketing of the Product (collectively, the "Product Sales and
Marketing Expertise"). This transfer will commence upon the execution
of this Agreement and be completed within three (3) months of the
Effective Date. Two (2) Roche employees will be designated by Roche to
serve as primary representatives to receive the Sales and Marketing
Expertise from ACLARA. ACLARA will provide these Roche representatives,
at no charge to Roche, with any training at ACLARA's facilities that
may reasonably be required in order for the Sales and Marketing
Expertise to be effectively transferred to Roche. The transfer of Sales
and Marketing Expertise will not be considered complete until all
transferable, current assays have been transferred to Roche, and
Roche's and ACLARA's primary representatives have determined, each in
their reasonable discretion, that no other training or consultation
with ACLARA representatives will be necessary in order for Roche to
effectively sell, market and


- ---------------------- [*] Certain information on this page has been omitted and filed separately with the Securities and Exchange commission. Confidential treatment has been requested with respect to the omitted portions.


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use the transferred assays. ACLARA understands and agrees that
successful transfer of the Sales and Marketing Expertise is
instrumental to Roche's ability to sell the Product, and thus agrees it
will use its reasonable commercial efforts to ensure all Sales and
Marketing Expertise is transferred to Roche as expeditiously as
possible.


6.3.2 TRANSFER OF TECHNICAL/PRODUCT SUPPORT EXPERTISE. Subject to the
confidentiality terms above and to the terms of ACLARA's agreements
with third parties regarding, among other matters, assays, dispensers
and materials developed by the third parties and/or ACLARA, ACLARA
will, at no additional cost to Roche, transfer to Roche its entire body
of expertise that directly relates to technical support or use of the
Product, including expertise regarding developing miniaturized
homogeneous assay and qualifying dispensers (collectively, the
"Technical Support Expertise"). ACLARA represents and warrants that
ACLARA possesses a transferable body of Technical Support Expertise,
and ACLARA will make reasonable efforts to transfer such expertise, in
accordance with this Section 6.3.2, such that Roche will be able to
provide technical support and assistance relating to the Product at a
level substantially similar to the support provided by ACLARA during
the First Sales Year pursuant to Section 6.4. This transfer will
commence upon the date for such transfer appearing in the Work Plan and
be completed within twelve (12) months of such date. Two (2) Roche
employees will be designated by Roche to serve as primary
representatives to receive the Technical Support Expertise from ACLARA
(and these Roche representatives need not be the same representatives
designated to receive the Sales and Marketing Expertise described in
Section 6.3.1). ACLARA will provide these Roche representatives, at no
charge to Roche, with any training at ACLARA's facilities that may
reasonably be required in order for the Technical Support Expertise to
be effectively transferred to Roche. The transfer of Technical Support
Expertise will not be considered complete until all transferable,
current assays have been transferred to Roche, and Roche's and ACLARA's
primary representatives have determined, each in their reasonable
discretion, that no other training or consultation with ACLARA
representatives will be necessary in order for Roche to effectively
manage, utilize and fully support the transferred assays. On or before
twelve (12) months after the Effective Date, Roche will in good faith
provide ACLARA in writing a list of items of expertise yet to be
transferred and the Parties will agree in good faith to a plan for
transfer of such items.


6.4 TECHNICAL SUPPORT. During the First Sales Year, ACLARA will provide support and assistance to Roche for the development of miniaturized homogeneous assays for use on the Products ACLARA shall be compensated for such support and assistance through the Transfer Price as managed by an account ("Account") that will track the ordered Arteas 96 Product other than the Initial Order according to Transfer Prices set forth in Exhibit A. Every order by Roche ...