Distribution And Marketing Agreement

DISTRIBUTION AND MARKETING AGREEMENT


This DISTRIBUTION AND MARKETING AGREEMENT, including the attached Exhibits ("Agreement"), is made and entered into as of ______________, 1998 (the "Effective Date") by and between CIPHERGEN BIOSYSTEMS, INC., a California corporation with offices at 490 San Antonio Road, Palo Alto, CA 94306, USA ("CBI"), and Ciphergen Biosystems K.K., a Japanese corporation with offices at ______________, Japan ("JVC").


BACKGROUND


A. CBI is engaged in the business of developing, manufacturing, distributing, and selling Products (as defined below); and


B. JVC desires to solicit orders for Products from, and distribute and sell Products to, customers in the Territory (as defined below); and


C. JVC desires to purchase from CBI, and CBI desires to sell to JVC, such Products for the purpose of resale to customers in the Territory.


NOW, THEREFORE, in consideration of the mutual promises contained herein, CBI and JVC agree as follows:


1. DEFINITIONS


1.1 "AFFILIATE" means any entity which is controlled by CBI or JVC. An entity shall be regarded as in control of another entity for purposes of this definition if it owns or controls more than fifty percent (50%) of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority); provided, however, that in any country where the local law does not permit equity participation of at least 50%, then Affiliate will include any company in which CBI or JVC owns or controls, directly or indirectly, the maximum percentage of such outstanding stock or voting rights permitted by law.


1.2 "CHANGE IN CONTROL" with respect to a Party means (i) a merger of that Party with or into another Person, or a sale of all or substantially all of a Party's assets to another Person, if as a result of the merger or asset sale the holders of a majority of the Party's voting securities before the transaction hold less than a majority of the voting securities of the surviving entity, or (ii) the acquisition by a Person or a group acting in concert of a majority of a party's voting securities.


1.3 "CONSUMABLES" means CBI's ProteinChip-TM- arrays generally made available by CBI for use with Systems and items that CBI sells in the United States and Europe in one time or limited reuse with the Systems for life sciences research market applications.


1.4 "CUSTOMERS" means end users of Products in the Territory and in the Field.


1.5 "EFFECTIVE DATE" means the date first above written in the caption.


1.6 "FIELD" means life science research for internal purposes only. JVC's Customers of Products may not sell clinical diagnostic products or services nor sell information or data generated from Products acquired from JVC.


1.7 "PARTY" or "PARTIES" means CBI and JVC.


1.8 "PERSON" or "PERSONS" means a natural individual, partnership, firm, company, corporation, and any other form of business association.


1.9 "PRODUCTS " means Systems and Consumables manufactured by CBI and/or any third party who has been allowed by CBI to manufacture the same.


1.10"SC" means Sumitomo Corporation.


1.11"SYSTEMS " means CBI's Protein Biology System I and its successors based on CBI's Surface Enhanced Laser Desorption/Ionization (SELDI-TM-) technology, generally made available in the life sciences research market in the United States and Europe.


1.12 "SOFTWARE" means machine control software and bioinformatics software supplied with Systems for use in connection with the Products.


1.13 "SYSTEM SPECIFICATIONS" means operator's guide, package inserts, packaging specifications, label claims, instructional manuals and other material provided by CBI for use with Systems and Consumables.


1.14 "SC" means Sumitomo Corporation.


1.15 "TERM" is defined in Section 12.1.


1.16 "TERRITORY" means Japan.


1.17 "WORKING DAYS" means Monday through Friday, other than public holidays of the United States, the State of California, and Japan.


2. GRANT OF DISTRIBUTION RIGHTS


2.1 APPOINTMENT.


(a) Subject to the terms and conditions of this Agreement, CBI hereby grants to JVC the exclusive right, to market, sell and distribute in the Territory CBI's Products to Customers solely for use in the Territory and in the Field.


(b) Rights granted under 2.1(a) shall not include any patents, copyrights, maskwork rights, trade secrets, know-how or any other intellectual property of CBI.


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(c) CBI agrees not to grant licenses on any of its patents, copyrights, maskwork rights, trade secrets, know-how or any other intellectual property to any other Person without specifically excluding the right to market, sell and distribute in the Territory CBI's Products to Customers in the Territory and in the Field.


(d) CBI shall not (i) appoint any distributor of Products other than JVC in the Territory and in the Field; and (ii) sell or resell any Products to third parties other than JVC in the Territory and in the Field.


2.2 SOFTWARE LICENSE; NOTICES.


(a) CBI hereby grants to JVC a limited, non-exclusive, nontransferable, royalty-free license to use the Software, solely for the purposes of (i) demonstrating the Products, (ii) training and instructing JVC personnel, and (iii) allowing Customer use of the Products, in each case in accordance with the terms and conditions of this Agreement.


(b) Software provided to JVC hereunder is subject to this license and is not a sale of title to the Software and it is understood and agreed that CBI retains all right, title, and interest in and to Software. JVC agrees not to directly or indirectly reverse engineer, disassemble, decompile, or otherwise attempt to derive source code from the Software and not to copy the Software or use it for any other purpose except as expressly licensed.


(c) The terms of Section 2.2(b) apply in full force and effect to JVC's Customers, and JVC shall ensure that its Customers comply with the requirement not to directly or indirectly reverse engineer, disassemble, decompile, or otherwise attempt to derive source code from the Software and not to copy the Software or use it for any other purpose except as expressly licensed.


(d) JVC agrees not to modify, delete, or obscure any and all proprietary notices affixed to the Products, including, without limitation, the Software.


(e) JVC agrees to localize the Software for use in the Territory. CBI retains all right, title, and interest in any and all resulting copyrightable materials from such localization.


2.3 NO RIGHTS BEYOND PRODUCTS. It is understood and agreed that the foregoing rights do not include the right to market, license, sell or otherwise distribute any information or data derived from or with the use of Products.


2.4 RESERVATION OF RIGHTS. Except as expressly provided in this Section 2, no right, title, or interest is granted, whether express or implied, by CBI to JVC. Nothing in this Agreement shall be deemed to grant to JVC rights in any products or technology other than the Products, nor shall any provision of this Agreement be deemed to restrict CBI's right to exploit technology, know-how, patents, or any other intellectual property rights relating to the Products and applications other than Products. CBI reserves the rights to market, sell, or otherwise distribute, directly or indirectly, Products in the Territory for use outside the Field.


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3. PAYMENT


3.1 PAYMENT


(a) JVC shall pay 80% of CBI's then published U.S. list price for the applicable Products. JVC shall pay 40% of CBI's then published U.S. list price for the Consumables purchased by JVC for internal use at JVC and for Customer demonstration. Limited quantities of such Consumables supplied to JVC shall be specified in the annual Business Plan (as defined in Section 1.6 and as required by Section 4.6 of the Joint Venture Agreement).


(b) CBI shall submit an invoice to JVC upon shipment by CBI of each Product ordered by JVC. Each such invoice shall state JVC's aggregate and unit transfer price for Products in a given shipment, plus any freight, taxes or other costs incident to the purchase or shipment initially paid by CBI but to be borne by JVC hereunder. Such payment shall be made in U.S. dollars net thirty (30) days by wire transfer after the date of shipment by CBI to JVC and deposited by wire into a bank account designated by CBI.


(c) Any payment for Products due which is not paid within five (5) days of the date such payments are due in accordance with Section 3.1(a) shall bear interest at the lesser of one and one-half percent (1-1/2%) per month or the maximum rate permitted by law, calculated on the number of days such payment is delinquent. This Section 3.1(b) shall in no way limit any other remedies available to CBI.


3.2 TAXES. Any and all amounts payable hereunder by JVC under Section 3 do not include any government taxes (including without limitation sales, use, excise, and value added taxes) or duties imposed by any governmental agency that are applicable to the export, import, or purchase of the Products (other than taxes on the net income of CBI), and JVC shall bear all such taxes and duties. JVC shall be responsible to pay all taxes, costs, or payments, if any, which result from compliance with applicable currency control restrictions including the Revised Foreign Exchange and Foreign Trade Control Act (Revised FECA). Any such taxes which are otherwise imposed on payments to CBI or JVC shall be the sole responsibility of JVC. When CBI has the legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to JVC's income and/or paid by JVC, unless JVC provides CBI with a valid tax exemption certificate authorized by the appropriate taxing authority. JVC shall provide CBI with official receipts issued by the appropriate taxing authority or such other evidence as is reasonably requested by CBI to establish that such taxes have been paid.


3.3 RECORDS; INSPECTION. JVC shall keep complete, true and accurate books of account and records for the purpose of determining the amounts payable under Section 3.1. Such books and records shall be kept at JVC's principal place of business for at least three (3) years following the end of the calendar quarter to which they pertain. Such records will be open for inspection during such three (3) year period by a representative or agent of the other Party for the purpose of verifying the amounts payable under Section 3.1. Such inspections may be made no more than once each calendar year, at reasonable times mutually agreed upon by CBI and JVC (each


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referred to as "Inspecting Party"). The Inspecting Party's representative or agent shall execute a confidentiality agreement prior to commencing any such inspection. Inspections conducted under this Section 3.4 shall be at the expense of the Inspecting Party's, unless a variation or error producing an underpayment in amounts payable exceeding five percent (5%) of the amount paid for any period covered by the inspection is established in the course of any such inspection, whereupon all costs relating to the inspection for such period and any unpaid amounts that are discovered will be paid by the inspected Party, together with interest on such unpaid amounts at the rate specified in Section 3.1(c) above.


4. PURCHASE AND SALE


4.1 FORECASTS AND PURCHASE ORDERS. Beginning on the Effective Date, and thereafter sixty (60) days prior to the first day of each calendar quarter, JVC shall provide to CBI a good faith, quarterly written forecast of Products that JVC expects to purchase and prospective customers over the twelve (12) months commencing with the first day of the next calendar quarter ("Forecasts"). The Parties acknowledge that the Forecasts are for CBI's planning purposes only and shall not be binding upon the Parties. JVC and CBI shall meet, by telephone or in person, not less than once per calendar quarter to review Forecasts.


4.2 ORDER AND ACCEPTANCE. All orders shall be by means of signed written Purchase Orders by JVC to a CBI employee designated in writing by CBI, sent to CBI at CBI's address for notice hereunder and proposing a delivery date that is consistent with the Forecasts and not less than sixty (60) days after CBI's receipt of such Purchase Order unless CBI waives this notice requirement when requested by JVC for a particular order ("Purchase Orders"). Orders shall be placed by a signed written Purchase Order, which may be provided to CBI by fax or e-mail. CBI shall accept Purchase Orders by fax, e-mail or in writing within fourteen (14) days of receipt, it being understood that no Purchase Order shall be binding upon CBI until accepted by CBI. CBI shall fulfill Purchase Orders accepted by CBI pursuant to the terms and conditions of this Agreement. CBI shall maintain full production capacity to meet the Purchase Order, but does not guarantee delivery of Products for delivery dates less than sixty (60) days of the Purchase Order. No partial shipment of an order shall constitute the acceptance of the entire order, absent the written acceptance of such entire order. Once accepted by CBI, JVC may cancel or reschedule Purchase Orders for Products only with CBI's prior written approval.


4.3 SHIPPING. All Products delivered pursuant to the terms of this Agreement shall be suitably packed for surface or air shipment, in JVC's discretion, in CBI's standard shipping cartons, and delivered, at JVC's direction, to JVC or a carrier agent, F.O.B. (as the term "F.O.B." is defined under Section 2319 of the California Uniform Commercial Code as of the Effective Date) the shipping location designated by CBI (the "Shipping Location"), at which time risk of loss shall pass to JVC. CBI shall ship Products using the carrier specified in JVC's Purchase Order provided that if JVC does not provide instructions with respect to the carrier to be used, CBI shall select the carrier. All freight, insurance, and other shipping expenses, as well as any special packing expenses incurred by CBI at the request of JVC, shall be paid by JVC. JVC shall also bear all applicable taxes, export taxes, duties and similar charges, and any charges that may be assessed against the Products after


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delivery to JVC or the carrier at the Shipping Location. All shipments and freight charges shall be deemed correct unless CBI receives from JVC, no later than forty-five (45) days after the shipping date of a given shipment, a written notice specifying the shipment, the purchase order number, and the exact nature of the discrepancy between the order and shipment or discrepancy in the freight cost, as applicable.


4.4 RETURNS. JVC may return Products only with CBI's prior written approval. Products returned to CBI other than under Section 6 shall be returned F.O.B. the destination point designated by CBI (as the term "F.O.B." is defined under Section 2319 of the California Uniform Commercial Code as of the Effective Date) and shall be subject to a restocking fee in an amount equal to ten percent (10%) of the transfer price paid by JVC to CBI for such Products computed in accordance with Section 3.1(a). JVC shall also bear all applicable taxes, export taxes, duties and similar charges, and any charges that may be assessed against the Products in connection with such delivery to CBI at the destination point.


5. INSPECTION AND ACCEPTANCE


JVC shall inspect all Products promptly upon receipt thereof and may reject any Product that fails to conform to the warranties set forth in Section 6 below at the time of delivery to JVC, provided that JVC complies with the provisions of Section 6.3 below. JVC may reject any Product rejected by Customers within thirty (30) days of rejection by Customers. Except as set forth in this Section 5 and Section 6 below, JVC shall return Products to CBI only with CBI's prior written approval.


6. LIMITED WARRANTY


6.1 STANDARD CBI SYSTEMS AND CONSUMABLES WARRANTY. CBI warrants to JVC that subject to the exclusions set forth in this Section 6.1 and in Section 6.2 below, the Systems and Consumables shall substantially conform to System Specifications, during the one-year warranty period after installation, covering parts and labor. The foregoing warranty is contingent upon proper use of the Systems and Consumables with the supplied Software in the applications for which they were intended as indicated in the Systems and Consumables label claims. The above limited warranty applies only to defects reported to CBI in accordance with CBI's standard reporting procedures described in the System Specifications and does not apply to any Systems and Consumables which, after dispatch from the Shipping Location, (i) have been altered, (ii) have not been maintained in accordance with any transportation, storage, handling or maintenance instructions supplied by CBI, (iii) have been damaged by negligence or accident, or (iv) have been damaged by acts of nature, vandalism, burglary, neglect, or misuse. In the event of any breach of the above limited warranty, JVC's exclusive remedy and CBI's sole and exclusive liability shall be, at CBI's sole election, within thirty (30) days after the end of the quarter during which defects are reported to CBI, to replace the Systems and Consumables, with Software supplied therewith, at CBI's expense or to provide JVC with a credit or refund in the amount of the transfer price paid by JVC for the non-conforming Systems, Consumables and Software.


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