Oem Supply Agreement

Exhibit 10.9


OEM SUPPLY AGREEMENT


OEM SUPPLY AGREEMENT ("Agreement") effective this ___________ day of ___________ 1998 by and between AFFYMETRIX, INC. a California corporation, having a place of business at 3380 Central Expressway, Santa Clara, California 95051 ("Affymetrix", as that term is further defined in Paragraph 1.2 hereof) and BECKMAN COULTER, INC., a Delaware corporation, having a place of business at 4300 North Harbor Boulevard, Fullerton, California 92834-3100 ("BCI", as that term is further defined in Paragraph 1.4 hereof).


R E C I T A L S


I. Affymetrix is in the business of developing, manufacturing and selling Array Chips (as that term is hereinafter defined).


II. BCI desires to purchase Array Chips from Affymetrix for resale to BCI customers.


NOW THEREFORE, in consideration of the mutual covenants and undertakings contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:


ARTICLE 1.0 DEFINITIONS


The following terms, when used herein with an initial capital letter and without regard to whether they appear in the singular, plural or possessive form, shall have the following defined meanings:


1.1 "AFFILIATE" shall mean any corporation or other form of limited liability legal person, partnership, association, joint venture or other form of business entity controlled by, controlling or under common control with a party hereto. As used herein, the word and root "control" in the context of a corporation shall mean the ownership, directly or indirectly, of more


than fifty percent (50%) of the voting shares or other equity interests entitled to vote in the election of directors of the corporation; and, in the context of any other form of business entity, the right to receive more than fifty percent (50%) of the net profits of such entity and the right to a majority interest in the management and control of such entity; provided that notwithstanding the foregoing definition, BCI may not have as an Affiliate entitled to receive the benefits of the licenses granted under Section 3.1 hereof (a) a corporation wherein any of the companies listed in Exhibit A is more than a passive investor in such Affiliate and such passive investor does not have the right to manage or control such Affiliate or (b) a partnership wherein any of the companies listed in Exhibit A is a partner.


1.2 "AFFYMETRIX" shall mean Affymetrix, Inc., its divisions and Affiliates and its and their permitted successors and assigns.


1.3 "ARRAY CHIPS" shall mean a series of polynucleotides arranged on a substrate to perform quantitative or qualitative analyses.


1.4 "BCI" shall mean Beckman Coulter, Inc., its divisions and Affiliates and its and their permitted successors and assigns.


1.5 "BCI SYSTEM" shall mean an instrument, device or system manufactured or distributed by BCI which uses Array Chips to perform quantitative or qualitative analyses. For the avoidance of doubt, if an instrument, device or system is manufactured by a third party and distributed by BCI only those specific instruments, devices or systems which are sold or leased or otherwise distributed to end users (directly or indirectly) by BCI are BCI Systems and the identical instrument, device or system which is sold, leased or otherwise distributed directly to the end user by the manufacturer or indirectly from the manufacturer to a third party and then to the end user are not BCI Systems.


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1.6 "PRODUCT" shall mean an Array Chip manufactured by Affymetrix and sold to BCI under the terms of this Agreement.


ARTICLE 2.0 IDENTIFICATION OF ARRAY CHIPS AS PRODUCTS


2.1 IDENTIFICATION OF ARRAY CHIPS BY AFFYMETRIX - Affymetrix shall, from time to time, notify BCI, in writing, of: (a) [ ](1) or (b) [ ](2). Such notice shall contain an offer from Affymetrix to manufacture and supply such Array Chips to BCI under the terms of this Agreement. Such notice shall also contain the specifications of such Array Chip, the transfer price for such Array Chip at an identified annual volume of purchases by BCI (the "Target Purchases") and a price ladder showing the transfer prices if the BCI purchases in any year are above or below the Target Purchases. The proposed transfer prices in such offer shall be fixed for the first year of BCI purchases.


2.1.1 The Affymetrix offer shall remain open for not less than [ ](3) from the date of receipt by BCI and may be accepted by BCI, by written notice to that effect to Affymetrix within such period. If BCI accepts such offer, such Array Chip shall become a Product under this Agreement.


2.2 IDENTIFICATION OF ARRAY CHIPS BY BCI - BCI may, from time to time, propose an Array Chip to be developed by Affymetrix and, when developed, manufactured by Affymetrix under this Agreement. The BCI proposal shall be in writing and shall specify the particulars of the


---------------- (1) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


(2) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


(3) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


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Array Chip and contain an estimate of BCI's anticipated purchases in each of the next five (5) years.


2.2.1 The BCI proposal shall remain in effect for not less than [ ](4) from the date of receipt by Affymetrix. Affymetrix may, by written notice to BCI, at any time within such period offer to develop and manufacture the proposed Array Chip for BCI. The Affymetrix offer will include a development schedule, the amount (if any) of Affymetrix development expenses to be reimbursed by BCI, the specifications for the Array Chip, a proposed first delivery date when commercial scale deliveries will begin, a transfer price for such Array Chip at Target Purchases and a price ladder showing the transfer prices if the BCI purchases in any year are above or below the Target Purchases. The proposed transfer prices in such offer shall be fixed for the first year of BCI purchases.


2.2.2 The Affymetrix offer shall remain open for not less than [ ](5) from the date of receipt by BCI and may be accepted by BCI by written notice to Affymetrix to that effect within such period. If BCI accepts such offer such Array Chip shall become a Product under this Agreement.


2.2.3 Affymetrix and BCI are parties to a research and development agreement of even date herewith under which Affymetrix has agreed to perform [ ](6) of contract research and development services on Array Chip technology and products of interest to BCI (the "R and D Agreement"). To the extent that any part of the [ ](7) under the R and D


--------------- (4) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


(5) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


(6) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


(7) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


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Agreement is unspent and an Affymetrix offer under Paragraph 2.2.1 hereof includes development expenses to be reimbursed by BCI then BCI shall off-set such development expenses by applying the unspent R and D funds up to the full amount of such development expenses.


ARTICLE 3.0 MANUFACTURE AND SUPPLY


3.1 SUPPLY - PURCHASE COMMITMENT - Affymetrix agrees to and shall manufacture, sell and deliver to BCI and BCI shall purchase and take from Affymetrix such quantities of the Products as BCI may order in accordance with Paragraphs 3.4 and 3.4.1 hereof.


3.2 SPECIFICATIONS - Each Product shall conform to its specifications in the Affymetrix offer of Article 2.0. Such specifications shall automatically be added to this Agreement, as Exhibit A, concurrently with the BCI acceptance of such offer. Notwithstanding the preceding sentence, BCI may at any time request changes, modifications or additions to the specifications either prior or subsequent to their addition to Exhibit A. Affymetrix will negotiate in good faith such changes, modifications or additions, including any corresponding adjustment to the transfer price or other applicable terms and conditions of this Agreement and will use reasonable commercial efforts to incorporate such BCI requested changes, modifications or additions. The new specifications will then be added to Exhibit A in replacement for the specification in the Affymetrix offer of Article 2.0.


3.3 CHANGES TO THE PRODUCTS - Affymetrix shall notify BCI of any proposed changes to a Product or to the raw materials used therein, or the methods for their manufacture, storage or shipment which may alter the Product's stability or performance. Such notice shall include a full description of the proposed change and sufficient samples of the proposed new product for BCI


-------------- SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


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to determine if the new product meets each and all of the specifications for such Product in Exhibit A, correlates in all respects with the Product or requires any operating software change for the BCI System. BCI will complete such determination promptly, but in no event longer than [ ](8) after receipt of such samples. If BCI determines that the proposed new product either does not meet specifications or does not correlate with the existing Product, then Affymetrix will, at its option, either not make the change or continue to sell BCI the existing Product for the remainder of the term of this Agreement. If BCI determines that the proposed new product meets specifications and correlates with the existing Product but requires a change to the operating software for the BCI System, then Affymetrix agrees to and shall: (a) continue to sell BCI the existing Product until the introduction of BCI's next regularly scheduled software modification for the effected BCI System and (b) provide sufficient samples of the new product at the prices specified in Paragraph 4.3, for BCI to perform system validation. If BCI determines that the proposed new product meets specifications, correlates with the existing Product and does not require any change to the operating software, then Affymetrix may make the desired changes and introduce the new product on ninety (90) days prior written notice.


3.4 FORECASTS AND ORDERING OF PRODUCT - BCI shall, promptly after acceptance of an Affymetrix offer under Article 2.0 for a Product provide Affymetrix with a written forecast of the quantities of such Product which BCI anticipates it will purchase from Affymetrix during each of the next twelve (12) months. A non-cancelable BCI Purchase Order for the total quantity, if any, specified during the initial six (6) months of this Agreement, shall accompany the forecast. The remaining six (6) months of the forecast shall be BCI's best estimate of its requirements for such


---------------- (8) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


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Product from Affymetrix during such period. The forecast shall not be binding on either party and shall be used for planning purposes only.


3.4.1 BCI shall, within ten (10) days of the end of each three (3) month period commencing with the acceptance of the Affymetrix offer of Article 2.0 for a Product, send Affymetrix a revised twelve (12) month forecast for such Product. BCI shall include with each revised forecast a non-cancelable Purchase Order for the quantities, if any, of such Product specified in months four (4) through six (6). The remaining six (6) months of the revised forecast shall be BCI's best estimate of its requirements for such Product from Affymetrix during such period, shall not be binding on either party and shall be used for planning purposes only.


3.4.2 Affymetrix shall build Products for BCI only in response to a BCI Purchase Order and not to a BCI forecast.


3.4.3 Each BCI Purchase Order shall set forth the quantity to be purchased, the delivery date, the form, in which the Products are to be shipped and shipping instructions.


3.5 DELIVERY - Affymetrix shall deliver the Products in the quantities specified in the BCI Purchase Orders, FOB Affymetrix loading dock. Affymetrix understands and accepts that BCI operates on a "just-in-time" manufacturing system and that the delivery date specified by BCI in the non-cancelable Purchase Order is when BCI needs the Products in-house. Accordingly, Affymetrix will plan, manufacture, test and provide adequate transportation time to assure that the delivery date is met. Affymetrix will promptly communicate to the BCI Purchasing Agent any anticipated delays in delivery so that special shipping or other arrangements can be made. Affymetrix will be responsible [ ](9). Any disputes arising from delivery scheduling shall, to the extent possible, be resolved by the BCI Purchasing Agent and the Affymetrix Account Manager. Any unresolved


(9) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.


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disputes shall be transferred to BCI and Affymetrix Vice-Presidents for settlement. Any disputes which have not been settled by the party's Vice-Presidents will be resolved in accordance with Paragraph 14.2.


3.5.1 BCI is not required to accept partial shipments.


3.6 RETURN MATERIAL AUTHORIZATION - Affymetrix agrees to promptly respond to all requests for return material authorizations and bear all freight and insurance costs associated with either Products which do not meet specifications or over shipments of Product.


3.7 PRODUCT PROBLEM - Each party shall promptly communicate to the other all information which comes to its attention pertaining to adverse reactions, product anomalies, or stability problems relative to or having a bearing on the Products. Affymetrix shall promptly investigate and regularly report back to BCI on its actions contemplated and taken to resolve all such problems.


3.8 PRODUCT CORRECTIVE ACTION - BCI shall be responsible for, coordinate and cond ...