Development And Supply Agreement

DEVELOPMENT AND SUPPLY AGREEMENT


between


AFFYMETRIX, INC.


and


GENETICS INSTITUTE, INC.


CONFIDENTIAL TREATMENT REQUESTED


TABLE OF CONTENTS


Page
----


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1


ARTICLE I. DEFINITIONS


1.1 Additional Gene Sequences . . . . . . . . . . . 2
1.2 Affiliate. . . . . . . . . . . . . . . . . . . . 2
1.3 Chip Patent Rights . . . . . . . . . . . . . . . 2
1.4 Confidential Information . . . . . . . . . . . . 3
1.5 Copyrights . . . . . . . . . . . . . . . . . . . 3
1.6 Contract Year. . . . . . . . . . . . . . . . . . 3
1.7 [ * ] . . . . . . . . . . . . . . . . . 3
1.8 [ * ] . . . . . . . . . . . . . . . . . 3
1.9 DNA Chips. . . . . . . . . . . . . . . . . . . . 4
1.10 Distributor. . . . . . . . . . . . . . . . . . . 4
1.11 DNA Chip Products. . . . . . . . . . . . . . . . 4
1.12 DNA Chip Technology. . . . . . . . . . . . . . . 4
1.13 Exclusivity Period . . . . . . . . . . . . . . . 4
1.14 Full-Time Equivalent . . . . . . . . . . . . . . 4
1.15 Fully-Loaded Manufacturing Cost. . . . . . . . . 5
1.16 Gene Expression Screening. . . . . . . . . . . . 5
1.17 Gene Fields. . . . . . . . . . . . . . . . . . . 6
1.18 Gene Patent Rights . . . . . . . . . . . . . . . 6
1.19 GI Novel Gene Discovery Field. . . . . . . . . . 6
1.20 GI Technology. . . . . . . . . . . . . . . . . . 6
1.21 Joint Technology . . . . . . . . . . . . . . . . 6
1.22 Know-How . . . . . . . . . . . . . . . . . . . . 6
1.23 Milestone. . . . . . . . . . . . . . . . . . . . 6
1.24 MTX Technology . . . . . . . . . . . . . . . . . 7
1.25 Net Sales. . . . . . . . . . . . . . . . . . . . 7
1.26 Novel Compounds. . . . . . . . . . . . . . . . . 9
1.27 Novel Gene List. . . . . . . . . . . . . . . . . 9
1.28 Novel Human Therapeutic Compounds. . . . . . . . 9
1.29 Other DNA Chip Products. . . . . . . . . . . . . 10
1.30 Party. . . . . . . . . . . . . . . . . . . . . . 10
1.31 Patent Rights. . . . . . . . . . . . . . . . . . 10
1.32 Performance Bonus. . . . . . . . . . . . . . . . 11
1.33 Probes . . . . . . . . . . . . . . . . . . . . . 11
1.34 Products . . . . . . . . . . . . . . . . . . . . 11
1.35 Projects . . . . . . . . . . . . . . . . . . . . 11
1.36 Project Director . . . . . . . . . . . . . . . . 11
1.37 Research Management Committee. . . . . . . . . . 11
1.38 Sublicensee. . . . . . . . . . . . . . . . . . . 11
1.39 [ * ]. . . . . . . . . . . . . . . . . . 12
1.40 [ * ]. . . . . . . . . . . . . . . . . . 12
1.41 Valid Claim. . . . . . . . . . . . . . . . . . . 12
1.42 Workplan . . . . . . . . . . . . . . . . . . . . 12


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CONFIDENTIAL TREATMENT REQUESTED


ARTICLE II. THE PROJECT


2.1 Purpose. . . . . . . . . . . . . . . . . . . . . 12
2.2 Gene Fields. . . . . . . . . . . . . . . . . . . 13
2.3 Term . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Staffing . . . . . . . . . . . . . . . . . . . . 17
2.5 Research Management Committee. . . . . . . . . . 17
2.6 Facilities . . . . . . . . . . . . . . . . . . . 18
2.7 Inspection . . . . . . . . . . . . . . . . . . . 18
2.8 Patent and Confidential Information Agreements . 18
2.9 Reports. . . . . . . . . . . . . . . . . . . . . 18


ARTICLE III. PROJECT FUNDING


3.1 Development Efforts of MTX . . . . . . . . . . . 19
3.2 Funding of Full-Time Equivalents . . . . . . . . 19
3.3 Capital Funding for Equipment. . . . . . . . . . 20
3.4 Other Expenditures . . . . . . . . . . . . . . . 21
3.5 Performance Bonuses. . . . . . . . . . . . . . . 21
3.6 Records. . . . . . . . . . . . . . . . . . . . . 22


ARTICLE IV. OWNERSHIP AND USE OF TECHNOLOGY


4.1 Ownership of Developments. . . . . . . . . . . . 22
4.2 Licenses . . . . . . . . . . . . . . . . . . . . 23
4.3 Rights of MTX to Joint Technology outside the
Project. . . . . . . . . . . . . . . . . . . . 24
4.4 Rights of GI to Joint Technology outside the
Project. . . . . . . . . . . . . . . . . . . . 25


ARTICLE V. EXCLUSIVITY


5.1 General Rights . . . . . . . . . . . . . . . . . 25
5.2 Use of Proprietary Gene Sequences. . . . . . . . 25
5.3 Use of Probes. . . . . . . . . . . . . . . . . . 26
5.4 GI Exclusivity on Collaborations Involving
the [ * ] . . . . . . . . . . .. . . . 26
5.5 GI Exclusivity on Collaboration Involving the
[ * ] . . . . . . . . . . . . . . . . 27
5.6 GI Exclusivity on collaborations Involving the
GI Novel Gene Discovery Field. . . . . . . . . 27
5.7 Limitations on Product Sales Involving the
Gene Fields. . . . . . . . . . . . . . . . . . 29
5.8 Project Refund and Payment Adjustment. . . . . . 29
5.9 Bilateral Communication. . . . . . . . . . . . . 29


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ARTICLE VI. BENCHMARKS AND ROYALTIES


6.1 Royalties to GI. . . . . . . . . . . . . . . . . 30
6.2 Benchmarks to MTX for Novel Human Therapeutic
Compounds. . . . . . . . . . . . . . . . . . . 32
6.3 Royalties to MTX for Novel Human Therapeutic
Compounds. . . . . . . . . . . . . . . . . . . 33
6.4 Reports and Payment. . . . . . . . . . . . . . . 37
6.5 Foreign Royalties. . . . . . . . . . . . . . . . 38
6.6 Taxes. . . . . . . . . . . . . . . . . . . . . . 38
6.7 Records. . . . . . . . . . . . . . . . . . . . . 39


ARTICLE VII. SUPPLY


7.1 Supply of DNA Chip Products. . . . . . . . . . . 39
7.2 Supply Price for DNA Chip Products . . . . . . . 40
7.3 Forecasts and Adequate Supply of DNA Chip
Products . . . . . . . . . . . . . . . . . . . 40
7.4 Supply of Other DNA Chip Products. . . . . . . . 41
7.5 Records. . . . . . . . . . . . . . . . . . . . . 41


ARTICLE VIII. PATENT PROSECUTION AND INFRINGEMENT RIGHTS


8.1 Responsibility for Patenting of Technology . . . 42
8.2 Infringement . . . . . . . . . . . . . . . . . . 43
8.3 Claimed Infringement . . . . . . . . . . . . . . 47


ARTICLE IX. CONFIDENTIAL INFORMATION


9.1 Treatment of Confidential Information. . . . . . 48
9.2 Release from Restrictions. . . . . . . . . . . . 48
9.3 Publications . . . . . . . . . . . . . . . . . . 49


ARTICLE X. TERMINATION


10.1 Term . . . . . . . . . . . . . . . . . . . . . . 50
10.2 Termination Due to Lack of Feasibility . . . . . 50
10.3 Termination Due to Lack of Progress. . . . . . . 52
10.4 Termination Due to an Impasse. . . . . . . . . . 52
10.5 Termination of Agreement for Breach. . . . . . . 54
10.6 Survival of Obligations; Return of Confidential
Information. . . . . . . . . . . . . . . . . . 54


ARTICLE XI. INDEMNIFICATION AND LIABILITY LIMITATIONS


11.1 Product Liability Indemnification. . . . . . . . 55


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CONFIDENTIAL TREATMENT REQUESTED


11.2 Liability. . . . . . . . . . . . . . . . . . . . 57


ARTICLE XII. EXPORT


12.1 Acknowledgement. . . . . . . . . . . . . . . . . 58
12.2 Written Assurance. . . . . . . . . . . . . . . . 58


ARTICLE XIII. MISCELLANEOUS


13.1 Representations and Warranties of MTX . . . . . 59
13.2 Publicity. . . . . . . . . . . . . . . . . . . . 60
13.3 Assignment . . . . . . . . . . . . . . . . . . . 60
13.4 Governing Law. . . . . . . . . . . . . . . . . . 60
13.5 Force Majeure. . . . . . . . . . . . . . . . . . 60
13.6 Waiver . . . . . . . . . . . . . . . . . . . . . 61
13.7 Notices. . . . . . . . . . . . . . . . . . . . . 61
13.8 No Agency. . . . . . . . . . . . . . . . . . . . 62
13.9 Entire Agreement . . . . . . . . . . . . . . . . 62
13.10 Headings . . . . . . . . . . . . . . . . . . . . 62
13.11 Severability . . . . . . . . . . . . . . . . . . 63
13.12 Successors and Assigns . . . . . . . . . . . . . 63
13.13 Third Parties. . . . . . . . . . . . . . . . . . 63
13.14 Counterparts . . . . . . . . . . . . . . . . . . 63


SCHEDULES


Schedule A - Workplan, Milestones and Performance Bonuses
Schedule B - [ * ]
Schedule C - Contract Year l Budget


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DEVELOPMENT AND SUPPLY AGREEMENT


AGREEMENT effective as of November 15, 1994 between AFFYMETRIX, INC., a California corporation having its principal place of business at 3380 Central Expressway, Santa Clara, California 95051 (hereinafter referred to as "MTX") and GENETICS INSTITUTE, INC., a Delaware corporation, having its principal place of business at 87 CambridgePark Drive, Cambridge, Massachusetts 02140 (hereinafter referred to as "GI").


INTRODUCTION


1. MTX has research and development facilities and experienced scientists, engineers, technical associates and assistants and other personnel and has rights to and has developed certain DNA chip based technology.


2. GI has research and development facilities and experienced scientists, clinicians, engineers, technical associates and assistants and other personnel which enable it to conduct research and development activities in the area of biotechnology and the application thereof to the development, production and manufacture, registration and marketing of biotechnology based pharmaceutical products.


3. MTX and GI desire to enter into a collaboration for the purpose of developing DNA chip based products that will assist GI in the discovery of novel human therapeutic compounds and novel uses of human therapeutic compounds.


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4. MTX and GI are willing, for the consideration and on the terms set forth herein, to enter into such a collaboration.


In consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, MTX and GI agree as follows:


ARTICLE I. DEFINITIONS


As used in this Agreement, the following terms, whether used in the singular or plural, shall have the following meanings:


1.1. "ADDITIONAL GENE SEQUENCES" is defined in Section 2.2 of this Agreement.


1.2. "AFFILIATE" means any corporation, company, partnership, joint venture and/or firm which controls, is controlled by or is under common control with a Party. For purposes of this Section 1.2, "control" shall mean direct or indirect ownership of at least 50% of the equity of an entity.


1.3. "CHIP PATENT RIGHTS" means any and all patents and patent applications of a Party (whether solely or jointly owned) which specifically relate to the design, engineering, manufacture or use of DNA Chips and are reasonably useful or necessary or required to develop, use, manufacture, distribute and/or sell DNA Chips. The Parties acknowledge that it is not anticipated that GI will develop any Chip Patent Rights. Notwithstanding the foregoing, for purposes of clarification, but without limitation, the Parties further acknowledge that any and all chip assays and Probes developed by the Parties in or for use in the Project shall not constitute Chip Patent Rights.


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CONFIDENTIAL TREATMENT REQUESTED


1.4. "CONFIDENTIAL INFORMATION" means (a) all proprietary information and materials, patentable or otherwise, of a Party which is disclosed by or on behalf of such Party to the other Party, including, but not limited to, DNA sequences, vectors, cells, substances, formulations, techniques, methodology, equipment, data, reports, know-how, preclinical and clinical trials and the results thereof, sources of supply, patent positioning and business plans, including any negative developments, which do not fall within any of the exceptions set forth in Sections 9.2(a), (b) and (c) of this Agreement and (b) any other information designated by the disclosing Party to the other Party as confidential or proprietary, whether or not related to the Project, which does not fall within any of the exceptions set forth in Sections 9.2(a), (b) or (c) of this Agreement.


1.5. "COPYRIGHTS" means all copyrights of a Party (whether solely or jointly owned) which (a) relate to technology used or developed in the Project and (b) are reasonably useful or necessary or are required to develop, use, manufacture, distribute and/or sell DNA Chip Products.


1.6. "CONTRACT YEAR" means any year commencing on November 15 and ending on November 14.


[ * ]


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1.9. "DNA CHIPS" means any and all DNA chips developed in the Project, the use, making or selling of which (a) is covered by a Valid Claim of any of the Patent Rights, (b) is covered by any of the Copyrights and/or (c) embodies any Know-How.


1.10. "DISTRIBUTOR" means a third party which is not an Affiliate or Sublicensee of a Party and which is a distributor, wholesaler or other entity purchasing Products from a Party or an Affiliate or Sublicensee for resale.


1.11. "DNA CHIP PRODUCTS" means DNA Chips, hybridization platforms developed in the Project, DNA chip readers developed in the Project, software developed in the Project and/or any and all other products developed in the Project, the use, making or selling of which (a) is covered by a Valid Claim of any of the Patent Rights, (b) is covered by any of the Copyrights and/or (c) embodies any Know-How.


1.12. "DNA CHIP TECHNOLOGY" means the Copyrights, Know-How and/or Patent Rights.


1.13. "EXCLUSIVITY PERIOD" means the period commencing on the date of this Agreement and ending on the fifth anniversary of the date of this Agreement.


1.14. "FULL-TIME EQUIVALENT" means the equivalent of a full-time technical employee's work time over a 12-month period (including normal vacations and holidays); the portion of a Full-Time Equivalent year devoted by a technical employee to the Project shall be determined by dividing the number of days during any 12-month period devoted by such employee to the Project by the total


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number of working days during the 12-month period. As used in this Section 1.14, a "technical employee" shall include any scientist, engineer, technical associate or assistant and/or other personnel (whether an employee or consultant) assigned to the Project.


1.15. "FULLY-LOADED MANUFACTURING COST" means (a) costs directly attributable to manufacturing, quality assurance and quality control related to a unit of product (i.e., those costs which vary with production), including, but not limited to, direct labor and benefit expenses for manufacturing, and consumable bulk and other production materials, as determined in accordance with United States generally accepted cost accounting practices, plus (b) fixed manufacturing overhead costs allocable to the product based on the actual utilization of the manufacturing facility, including but not limited to, direct benefit and labor expenses for technical services and support services, depreciation, maintenance and repairs and insurance costs associated with such utilization of the manufacturing facility, as determined in accordance with United States generally accepted cost accounting practices, and less (c) costs otherwise paid for by GI pursuant to Sections 3.2 and 3.3 of this Agreement.


1.16. "GENE EXPRESSION SCREENING" means the use of DNA chip based technology as a research tool to measure the presence and/or levels of nucleic acid sequences for the purpose of discovering novel human therapeutic compounds and novel uses of human therapeutic compounds which, in each case, are encoded by or regulated by the genes (or their interspecies homologues) probed


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for on the DNA chip or are gene products identified by the elimination of proteins encoded by the nucleic acid sequences on the DNA chip.


1.17. "GENE FIELDS" means the [ * ]


1.18. "GENE PATENT RIGHTS" means all patents and patent applications of a Party (whether solely or jointly owned) which relate to Novel Compounds or the genes related thereto and are reasonably useful or necessary or are required to develop, use, manufacture, distribute and/or sell Novel Compounds. The Parties acknowledge that it is not anticipated that MTX will develop any Gene Patent Rights.


1.19. "GI NOVEL GENE DISCOVERY FIELD" is defined in Section 2.2 of this Agreement.


1.20. "GI TECHNOLOGY" is defined in Section 4.1 of this Agreement.


1.21. "JOINT TECHNOLOGY" is defined in Section 4.1 of this Agreement.


1.22. "KNOW-HOW" means all information, patentable or otherwise, of a Party (whether solely or jointly owned) which (a) is used or developed in the Project and (b) is reasonably useful or necessary or is required to develop, use, manufacture, distribute and/or sell DNA Chip Products.


1.23. "MILESTONE" means any of the milestones set forth in SCHEDULE A to this Agreement.


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1.24. "MTX TECHNOLOGY" is defined in Section 4.1 of this Agreement.


1.25. "NET SALES" means the aggregate United States Dollar equivalent of [ * ] less (a) [ * ]. Net Sales shall not include [ * ]. If a Party or an Affiliate or Sublicensee sells Products to a Distributor, Net Sales shall be deemed to be [ * ]. In the event that a Party or any of its Affiliates or Sublicensees shall make any transfer of Products to third parties for other than monetary value in whole or in part, such transfer shall be considered a sale hereunder for accounting and royalty purposes.


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Net Sales for any such transfers shall be determined on a country-by-country basis and shall be [ * ]. Notwithstanding the foregoing, no transfer of Products for test or developmental purposes or as samples shall be considered a sale hereunder for accounting and royalty purposes unless such transfer is for monetary value. If Products are sold as part of a system, package or combination product, Net Sales shall be [ * ]. If such Product is not sold separately, [ * ]. Without limiting the generality of the foregoing, [ * ].


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1.26. "NOVEL COMPOUNDS" means proteins (or any peptides or domain deleted, modified (i.e., by chemical or enzymatic cleavage or otherwise), variant or mutant forms thereof) derived from novel genes discovered by GI or its designated Affiliates through the use of DNA Chip Products or proteins (or any peptides or domain deleted, modified (i.e., by chemical or enzymatic cleavage or otherwise), variant or mutant forms thereof) for which novel uses are discovered by GI or its designated Affiliates through the use of DNA Chip Products. For purposes of this definition, if a DNA Chip Product was useful to GI or its designated Affiliates in the discovery of the novel gene or novel use, the related protein (or peptide or domain deleted, modified (i.e., by chemical or enzymatic cleavage or otherwise), variant or mutant form thereof) shall be deemed to have been discovered through the use of DNA Chip Products. Novel Compounds shall not include [ * ] for which novel uses are discovered by GI or its designated Affiliates through the use of DNA Chip Products.


1.27. "NOVEL GENE LIST" is defined in Section 2.2 of this Agreement.


1.28. "NOVEL HUMAN THERAPEUTIC COMPOUNDS" means human therapeutic proteins (or any peptides or domain deleted, modified (i.e., by chemical or enzymatic cleavage or otherwise), variant or mutant forms thereof) derived from novel genes discovered by GI or its designated Affiliates through the use of DNA Chip Products or proteins (or any peptides or domain deleted, modified (i.e., by


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chemical or enzymatic cleavage or otherwise), variant or mutant forms thereof) for which novel human therapeutic uses are discovered by GI or its designated Affiliates through the use of DNA Chip Products. For purposes of this definition, if a DNA Chip Product was useful to GI or its designated Affiliates in the discovery of the novel gene or novel use, the related protein (or peptide or domain deleted, modified (i.e., by chemical or enzymatic cleavage or otherwise), variant or mutant form thereof) shall be deemed to have been discovered through the use of DNA Chip Products. Novel Human Therapeutic Compounds shall not include [ * ] for which novel human therapeutic uses are discovered by GI or its designated Affiliates through the use of DNA Chip Products.


1.29. "OTHER DNA CHIP PRODUCTS" means DNA chips developed outside the Project, hybridization platforms developed outside the Project, DNA chip readers developed outside the Project, software developed outside the Project and/or any and all other products developed outside the Project, the use, making or selling of which (a) is covered by a Valid Claim of any of the Patent Rights, (b) is covered by any of the Copyrights and/or (c) embodies any Know-How.


1.30. "PARTY" means MTX or GI; "PARTIES" means MTX and GI.


1.31. "PATENT RIGHTS" means all patents and patent applications of a Party (whether solely or jointly owned) which (a) relate to technology used or developed in the Project and (b) are


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reasonably useful or necessary or are required to develop, use, manufacture, distribute and/or sell DNA Chip Products.


1.32. "PERFORMANCE BONUS" means any of the performance bonuses set forth in SCHEDULE A to this Agreement.


1.33. "PROBES" means the oligos selected for use in the DNA Chips.


1.34. "PRODUCTS" means either (a) DNA Chip Products, (b) Novel Human Therapeutic Compounds or (c) Other DNA Chip Products.


1.35. "PROJECT" means the research and development program jointly conceived, planned, organized, controlled and performed by MTX and GI pursuant to the Workplan and this Agreement.


1.36. "PROJECT DIRECTOR" means either of the senior scientists for the Project designated from time to time by MTX or GI.


1.37. "RESEARCH MANAGEMENT COMMITTEE" means the committee consisting of two members from each of MTX and GI, as designated by MTX and GI from time to time, which committee shall be responsible for planning and overseeing the Project.


1.38. "SUBLICENSEE" means, with respect to MTX, a third party which is not an Affiliate of MTX and to whom MTX has granted a license or sublicense to develop, use, manufacture, distribute and/or sell DNA Chip Products and/or Other DNA Chip Products and, with respect to GI, a third party which is not an Affiliate of GI and to whom GI has granted a license or sublicense to develop, use, manufacture, distribute and/or sell Novel Human Therapeutic Compounds discovered by GI or its designated Affiliates. A third


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party which is not an Affiliate of GI and which purchases Novel Human Therapeutic Compounds in bulk form from GI shall be deemed to be a Sublicensee of GI and not a Distributor of GI.


[ * ]


1.41. "VALID CLAIM" means a claim of an unexpired patent which shall not have been withdrawn, canceled or disclaimed, nor held invalid or unenforceable by a court of competent jurisdiction in an unappealed or unappealable decision, or the claim of a patent application which has not been on file for more than five years.


1.42. "WORKPLAN" means the workplan set forth in SCHEDULE A to this Agreement.

ARTICLE II. THE PROJECT


2.1. PURPOSE. The purpose of the Project shall be to collaborate on the further development and application of MTX's existing DNA Chip Technology to Gene Expression Screening in the Gene Fields. With respect to each Gene Field, MTX and GI shall develop one or more DNA Chips and related DNA Chip Technology. Each of the Parties agrees to undertake the Project on a best efforts basis with the objective of completing the Milestones in accordance with the Workplan and by the third anniversary of the date


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of this Agreement. The Parties acknowledge that it may be necessary to make changes to the Milestones and the Workplan during the course of the Project. All material changes to the Milestones and the W ...