Affymetrix Instrument And Chip Supply Agreement

EXHIBIT 10.59


Confidential Treatment has been requested for portions of this exhibit. This 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.


Affymetrix Instrument and Chip Supply Agreement


F. Hoffmann-La Roche Ltd. and Affymetrix, Inc.


dated


January 29, 2003


TABLE OF CONTENTS


I.

Introduction


II.

Common Terms and Definitions.


III.

Chip and Affymetrix Instrument Supply


IV.

Custom Array Development


V.

Proprietary Rights


VI.

Compensation


VII.

Manufacturing Process Change.


VIII.

Technical Support and Product Service


IX.

Intellectual Property Ownership


X.

Warranty


XI.

Limited Liability


XII.

Indemnity


XIII.

Term and Termination


XIV.

Miscellaneous.


Annex 1:

Current Form of Customer Service Provider Addendum


Annex 2:

Current Affymetrix Instrument Service Level Packages


Annex 3:

Software Maintenance Terms and Conditions


Exhibit A:

Affymetrix Instrument Pricing Schedule


Exhibit B:

Catalog Chip and Custom Array Pricing Schedule


AFFYMETRIX INSTRUMENT AND CHIP SUPPLY AGREEMENT


January 29, 2003

This AFFYMETRIX INSTRUMENT AND CHIP SUPPLY AGREEMENT (" Agreement") is effective as of the date first written above (" Effective Date") between Affymetrix, Inc., a Delaware corporation (" Affymetrix"), and F. Hoffmann-La Roche Ltd. ( " Roche").

I. Introduction .

(a) Affymetrix has research, development and manufacturing capabilities and facilities, and has developed certain rights relevant to DNA probe array-based technology.

(b) Roche has research, development and manufacturing capabilities required for the development and commercialization of diagnostic products utilizing DNA probe array-based technology.

(c) As part of the Collaboration, Affymetrix and Roche desire to enter into an agreement whereby Affymetrix will supply Roche with DNA probe arrays, instruments related thereto and other products related to the foregoing for use in or with Diagnostic Products developed by the Parties pursuant to the Collaboration.

(d) In consideration of the mutual covenants and promises contained in this Agreement, Affymetrix and Roche agree as follows:

II. Common Terms and Definitions .


(a) Common Terms .

(i) Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in the Common Terms Agreement, dated as of even date herewith, between Affymetrix and Roche (the " Common Terms Agreement").

(ii) This Agreement shall be governed by and subject to the provisions contained in the Common Terms Agreement, in accordance with its terms.

(b) Definitions .

(i) "Affymetrix Instrument Pricing Schedule" shall have the meaning set forth in Section III(g)(i) .

(ii) "Affymetrix Instrument Service Level Packages" shall have the meaning set forth in Section III(i) .

(iii) "Affymetrix Service Levels" shall have the meaning set forth in Section VIII(a) .

(iv) "Chip Improvement Inventions" shall mean all inventions that are conceived or first reduced to practice by an employee or contractor of a Party or its


1


Affiliates resulting from design or use of the Arrays supplied hereunder which relate to probe Array manufacturing techniques, probe Array layouts, probe Array packaging techniques, probe Array assay techniques (but only insofar as such assay techniques relate to processes that occur following nucleic acid extraction and are directly related to Arrays of nucleic acid probes), and probe Array software analysis techniques relating to the creation of genetic information such as but not limited to genotypes, sequences, base calls and qualitative or quantitative expression levels. Chip Improvement Inventions shall not include analytic software which takes such genetic information discussed in the preceding sentence and from such information derives predictions, prognoses, diagnoses, treatment recommendations, or related information or is specific to particular Content. It is hereby understood that inventions made independently of design or use of Arrays (such as those inventions made in the course of design or use of Roche's proprietary technologies or other non-Affymetrix technologies) are not Chip Improvement Inventions within the meaning of this Agreement. Chip Improvement Inventions shall further not include any other inventions that are conceived of or reduced to practice by an employee or contractor of a Party or its Affiliates including, for example, expression data or discoveries resulting therefrom, targets identified through the use of the Arrays, or correlations between genetic sequences and function.

(v) "Content Chips" shall have the meaning set forth in Section III(a)(iii) .

(vi) "Fully Loaded Cost Plus Basis" shall mean, for a particular Catalog Chip or Custom Array, as the case may be, the sum of (i) [***] and (ii) the [***].

(vii) "[***] Transfer Prices" shall have the meaning given to such term on Exhibit B hereto.

(viii) "Initial Design Fee" shall have the meaning set forth in Section VI(a) .

(ix) "Manufacturing Facility Fee" shall mean the amount specified in the Development Plan for a Diagnostic Product that Affymetrix may need to build, staff, and otherwise prepare a manufacturing facility for the production of Arrays for a Diagnostic Product.

(x) "Projected Base Markup" shall mean the product of (i) [***] multiplied by (ii) the [***].

(xi) "Projected Fully Loaded Cost" shall mean the [***].

(xii) "Projected Fully Loaded Cost Plus Basis" shall mean, for a particular Array, as the case may be, the sum of (i) [***] and (ii) the [***].

(xiii) "Projected Markup Percentage" shall mean the percentage mark up over [***] embedded in the [***] as set forth in the Supply Agreement as of the Effective Date, which percentage [***] the Collaboration.


2


(xiv) "Return Materials Authorization" shall have the meaning set forth in Section VI(d) .

(xv) "Services" shall mean technical support and product service (including support for adaptation for diagnostic uses).

(xvi) "Specification" shall mean written design and/or manufacturing specifications for a particular Array or Diagnostic Product incorporating an Array, as applicable, either set forth in the Development Plan as then in effect or as provided by Roche to Affymetrix.

III. Chip and Affymetrix Instrument Supply.

(a) Chip Supply . Beginning on the Effective Date, Affymetrix agrees to deliver Chips to Roche, in accordance with and subject to the terms of this Agreement, as follows:

(i) for Roche's use as components of Diagnostic Products (" Component Chips");

(ii) for Roche's use in connection with its own development of Diagnostic Products (" Development Chips");

(iii) in a quantity limited to an aggregate number of Chips of up to [***] such Chips per [***] through [***], for Roche's use exclusively to develop Content for Diagnostic Products (" Content Chips"); provided that Roche shall, for each Content development program, notify Affymetrix of the Content intended to be developed and its expected application; and

(iv) in the event Roche needs additional Chips for Content discovery, Roche may propose to Affymetrix specific content discovery programs and Affymetrix will consider extending the right to purchase Content Chips, specifically considering that such past and further use does not erode or otherwise compromise Affymetrix' research supply business with its customers.

(b) Physical Defects . Affymetrix will promptly replace any Chips that have Physical Defects [***] Roche; provided Roche gives notice to Affymetrix and returns such Chips within the Chips' remaining shelf life and otherwise in accordance with the procedures in Section VI(d) hereof. If such Component Chip has already been incorporated into a Diagnostic Product that has been shipped to a Customer, then to the extent that Diagnostic Products can be salvaged on a commercial basis, Affymetrix will pay the [***], and to the extent the components of that Diagnostic Product cannot be salvaged, Affymetrix will reimburse Roche for Roche's [***] in which such Component Chip was included.

(c) Forecasts . On at least a quarterly basis, Roche will provide a reasonable, good faith forecast of Custom Arrays and Catalog Chips to be supplied by Affymetrix (such forecasts to be supplied with the Affymetrix part number, if any). The forecasts shall indicate, with respect to each part number (or Chip design in the absence of part number), whether those


3


Chips are to be used as Component Chips, Development Chips or Content Chips, and will provide a [***]-quarter rolling projection of product demand; provided that (i) the next quarterin such forecast shall constitute a firm commitment obligating Roche to issue purchase orders for delivery of at least [***]% of the next quarter forecast quantities (100% of such next quarter forecast quantities, the " Firm Commitment") of each type of Chip (by part number, if any) set forth therein in such quarter, and (ii) the subsequent quarters of such forecast will be for capacity planning purposes only, and shall not constitute a firm commitment to issue any purchase orders. The forecast will be provided according to a mechanism and on forms to be agreed upon in good faith by the Parties. Affymetrix shall supply at least [***]% of the Firm Commitment and will use commercially reasonable efforts to supply [***]% of the Firm Commitment of Chips in any forecast period and to meet the time specified in any purchase order in any forecast period; provided , that manufacture will be firmly scheduled and specific delivery times will be confirmed by Affymetrix only after receipt of the purchase order specific to those Chips to be delivered. After the initial forecast, if the aggregate number of ordered Chips of a particular type forecast for a quarter increases by more than [***]% from the forecast provided for the previous quarter, then [***]% of the number of such Chips above the [***]% increase shall be supplied in a reasonable time after the initial delivery time projection, but shall not be subject to breach on account of late supply thereof, unless Affymetrix has given its prior consent to supply such Chips.

(d) Use and Transfer of Chips and Data Therefrom .

(i) Roche may not: (A) transfer the Chips to Third Parties, except Component Chips as components of a Diagnostic Product and pursuant to the License Agreement; (B) purposefully use any Chip, or data generated by any Chip supplied pursuant to this Agreement or any Database to develop or discover Content (other than Content Chips); (C) reverse engineer Chips delivered hereunder; (D) reuse any individual Chip; (E) use Chips or Sell Chips for use in diagnostic or other settings requiring FDA or other regulatory agency approval unless Roche obtains such approval; or (F) use Chips or sell such Chips for use in any manner that is inconsistent with any legal or regulatory requirement. Roche understands that neither the Chips nor the Affymetrix Instruments have received FDA or other regulatory agency approval as supplied under this Agreement.

(ii) Unless otherwise expressly permitted by any Collaboration Agreement, Roche shall not sell, distribute or otherwise transfer to Third Parties any data or Database derived from any Arrays supplied pursuant to this Agreement, except in connection with a Diagnostic Product, provided that Roche shall not sell, distribute or transfer on a commercial basis a standalone Database.

(e) Packing and Shipping . Arrays will be packed in Affymetrix' standard shipping packages and shipped to the address specified by Roche in accordance with quality assurance and packaging procedures determined by Affymetrix from time to time. If a particular Custom Array requires any packaging, process or procedure other than those Affymetrix utilizes for its Catalog Chips, then upon the reasonable request of Roche, Affymetrix shall perform such packaging, processes or procedures at an additional charge on a [***]. Roche agrees to provide to Affymetrix, [***], the training, Technology, know-how, equipment and Intellectual Property


4


licenses required to perform such packaging, processes and procedures requested by Roche that are different than those Affymetrix utilizes for its Catalog Chips.

Deliveries of Arrays will be F.O.B. Affymetrix' facility or the facility of its sales representative. Affymetrix will ship via a carrier selected by Roche or, if none is specified by Roche, Affymetrix will select the carrier. Title and risk of loss or damage for deliveries will pass to Roche upon Affymetrix' actual delivery of the Arrays to the carrier for shipment to Roche. Roche will pay all shipping costs, duties and sales taxes. Roche will advise Affymetrix in writing if insurance is desired on any shipments of Arrays, and will reimburse Affymetrix for all such insurance charges.

(f) Genetic Information . Affymetrix will endeavor to provide Roche with sufficient genetic information to identify the Genes on each Catalog Chip provided, if any. If Affymetrix updates its information about any Catalog Chips to include additional or different genetic sequence information relevant to the development of Diagnostic Products, Affymetrix will endeavor to provide such information to Roche.

(g) Affymetrix Instruments .

(i) Affymetrix Instrument Purchases by Roche for Diagnostic Product Development . Affymetrix agrees to supply Roche and its Affiliates with Affymetrix Instruments for use with Arrays for use in the development of Diagnostic Products in accordance with the Collaboration Agreements. Such Affymetrix Instruments shall be purchased pursuant to purchase orders provided to Affymetrix at the prices and on terms and conditions set forth on the Affymetrix Instrument Pricing Schedule (the " Affymetrix Instrument Pricing Schedule") attached hereto as Exhibit A , and Affymetrix will fill such orders with not less than the priority afforded any other purchaser. Roche shall have the option to [***] hereunder for [***] Affymetrix [***] Affymetrix' [***] then in effect. Roche shall have no right to sell, distribute or otherwise transfer any Affymetrix Instrument supplied under this Agreement except to its Affiliates exclusively for use in the development of Diagnostic Products or in subsection (ii) below.

(ii) Affymetrix Instrument Purchases for Reagent Agreement Plans . Affymetrix agrees to supply Roche and its Affiliates with Affymetrix Instruments for use with Diagnostic Products that are sold pursuant to a Reagent Agreement Plan. Such Affymetrix Instruments shall be purchased pursuant to purchase orders provided to Affymetrix at the prices and on terms and conditions set forth on the Affymetrix Instrument Pricing Schedule attached hereto as Exhibit A , and Affymetrix will fill such orders with not less than the priority afforded any other purchaser. Roche shall have no right to sell, distribute or otherwise transfer any Affymetrix Instrument supplied under this Section, except to its Affiliates exclusively for use in a Reagent Agreement Plan.

(iii) Affymetrix Instrument Purchases by Customers of Roche . Other than as set forth in Section III(g)(ii) above, Affymetrix agrees to supply Roche Customers of Diagnostic Products with Affymetrix Instruments for use with Diagnostic Products that are sold pursuant to the Collaboration Agreements, provided that such Customers are located and taking delivery in an Affymetrix Territory. Such Affymetrix Instruments


5


shall be purchased pursuant to purchase orders provided by the Customer to Affymetrix at Affymetrix' then current prices and terms and conditions, and Affymetrix will fill such orders with not less than the priority afforded any other purchaser. Affymetrix Instrument purchases by Customers who are located or taking delivery in an Unserved Territory shall be governed by the terms of the Agency Agreement.

(iv) Affymetrix Instrument Packaging and Shipping . Affymetrix Instruments purchased by Roche or its Affiliate will be packed in Affymetrix' standard shipping packages and shipped to the address specified by Roche or its Affiliate in accordance with quality assurance and packaging procedures determined by the Parties from time to time. Deliveries will be F.O.B. Affymetrix' facility or the facility of its sales representative. Affymetrix will ship via a carrier selected by Roche or its Affiliate or, if none is specified by Roche or its Affiliate, Affymetrix will select the carrier. Title and risk of loss or damage for deliveries will pass to Roche or its Affiliate upon Affymetrix' actual delivery of the Affymetrix Instruments to the carrier for shipment to Roche or its Affiliate. Roche or its Affiliate will pay all shipping costs, duties and sales taxes. Roche or its Affiliate will advise Affymetrix in writing if insurance is desired on any shipments of Affymetrix Instruments, and will reimburse Affymetrix for all such insurance charges.

(h) Terms of Service .

(i) Any service provided by Affymetrix on Affymetrix Instruments shall be governed by Affymetrix' then-current forms of Customer Service Provider Addendum and Current Affymetrix Instrument Service Level Packages, the current forms of which are attached hereto as Annexes 1 and 2 (the " Affymetrix Instrument Service Level Packages"); and

(ii) Notwithstanding anything to the contrary in this Agreement, Annex 3 hereto, or such amended version as may be reasonably adopted from time to time, shall govern the terms of all Software maintenance and upgrades.

IV. Custom Array Development.

(a) Product Specifications . In addition to the terms of Section III above, with respect to each Custom Array required for a Diagnostic Product, Roche shall supply Specifications for such Custom Array along with an initial supply forecast for the Diagnostic Product incorporating such Custom Array. Without limitation, Affymetrix acknowledges and agrees that the Specifications constitute Roche Technology (to the extent the technology contained in the Specifications does not constitute the Intellectual Property of Affymetrix or a Third Party).

(b) Shelf Life of Arrays . Each Custom Array shall have a shelf life of at least [***] after the Array has been shipped by Affymetrix to Roche. Affymetrix shall use commercially reasonable efforts to increase shelf life and to use appropriate shipping methods to preserve shelf life.


6


(c) Affymetrix Development Obligations . In addition to the terms of Section III above, for each Custom Array for which Affymetrix receives Specifications, Affymetrix will use reasonable commercial efforts to undertake and complete non-clinical development of the applicable Custom Array according to the Specifications, including manufacturing scale-up. Affymetrix shall also prepare and provide Roche with non-clinical development information for each applicable Custom Array, each as required by the applicable Development Plan.

V. Proprietary Rights .

Other than as agreed by the Parties pursuant to the Collaboration, Roche shall not buy arrays of diverse nucleic acids on solid supports from a Third Party if such arrays materially infringe or would materially infringe the patent or copyright rights of Affymetrix or its Affiliates. Roche and Affymetrix will notify each other of: (i) any potential infringement of any of Affymetrix' Intellectual Property (i.e., Affymetrix Technology) of which that Party becomes aware; (ii) any potential infringement by any Third Party of any of the Affymetrix Intellectual Property incorporated in, embodied by or relied upon to manufacture a Diagnostic Product; or (iii) any potential infringement by a Diagnostic Product of any Content or Intellectual Property owned or asserted to be owned by a Third Party of which that Party becomes aware. All notifications under this Section V shall be treated as Confidential Information and shall not be disclosed to the alleged infringer or any other party.

VI. Compensation .

(a) Initial Design Fees . With respect to the Specifications for each Custom Array Roche provides to Affymetrix, Roche shall pay Affymetrix a design fee equal to [***] of the design of such Custom Array [***] thereon for each Custom Array set design that Affymetrix would need to create to implement the Development Plan for such Diagnostic Product (the " Initial Design Fee"). Roche will pay such Initial Design Fee upon delivery of the Specifications, including the complete target sequence for each mask set design.

(b) Pricing of Chips, Affymetrix Instrumentation and Custom Arrays .

(i) Custom Arrays and Catalog Chips .

(a) Array Pricing . Affymetrix shall sell all Chips supplied to Roche under this Agreement [***] other than Chips in [***] per year for Content Development in the first [***] years of this Agreement in [***] Arrays (or an equivalent) pursuant to Section III(c . To set a baseline for the [***] and to provide [***] transfer prices, Exhibit B hereto contains a schedule of the [***] Transfer Prices for Chips (the [***] price that Affymetrix will charge for Component Chips and Development Chips sold to Roche) produced in the format, with the number of features, for the particular year and with packaging [***], as set forth therein. For Component Chips and Development Chips, the purchase price will be subject to the [***] Transfer Price. Although the Parties agree that [***] of a Chip may differ depending on a variety of cost factors, including, but not limited to, wafer size, number of features on the Chip, and manufacturing and packaging costs, Affymetrix agrees that [***], as set forth on Exhibit B , shall be [***] during the term of this Agreement and shall be subject to Roche's audit in accordance with Section VI(e) below. Affymetrix shall determine the amount of any [***] of a


7


Chip versus the projected [***] of such Chip on a quarterly basis within 45 days of each quarter. To the extent such [***] exceeds [***]% for that quarter, (i) in the case of an [***], Roche will be credited the amount of the [***] in the next quarter following the [***], and (ii) in the case of an [***], Affymetrix will be credited the amount of the [***] in the next quarter following the [***]. Pricing for [***] purchased pursuant to Section III(a)(iv) will be at prices equal to Affymetrix' [***] price of [***], which is [***] each.

(b) Price [***] . The Array pricing set forth on Exhibit B is based on technological improvements Affymetrix expects to make over time. Affymetrix agrees to [***] for Arrays purchased by Roche pursuant to this Agreement as described on Exhibit B , [***].

(c) Technology Reinvestment Covenant . In addition, Affymetrix agrees to invest at least [***] of the [***] in the Affymetrix Technology and broad-based applications research.

(ii) Affymetrix Instrumentation . Pricing shall be subject to Section III(g) .

(c) Manufacturing Facilities Fee . Upon adoption of each Development Plan (or as agreed between the Parties in advance if there is no Development Plan for a Diagnostic Product), Roche shall pay Affymetrix the Manufacturing Facility Fee, if any, specified in such Development Plan. Affymetrix shall make available to Roche the records specifically showing how each Manufacturing Facility Fee was spent on a product-by-product basis. If circumstances result in an underage or an overage in connection with a Manufacturing Facility Fee paid to Affymetrix, the ...