Collaboration Agreement
between
APPLIED BIOSYSTEMS AND CEPHEID

THIS AGREEMENT (Agreement) is made as of the 11th day of October, 2002 (the Effective Date) and is by and between Applera Corporation, a Delaware corporation, acting through its Applied Biosystems Group, with a place of business at 850 Lincoln Center Drive, Foster City, CA 94404, U.S.A. (ABI), and Cepheid, a California corporation with its principal place of business at 904 Caribbean Drive, Sunnyvale, CA 94089 (Cepheid). Cepheid and ABI are sometimes referred to herein individually as a Party, and collectively as the Parties.

1.     Background

1.1   Supply to the USPS. ABI and Cepheid will each independently and working collaboratively seek to develop and manufacture Products for use in Bio-Threat Agent Detection Systems. These Bio-Threat Agent Detection Systems are intended to be provided to the USPS through agreements among the USPS, Northrop Grumman Security Services (Northrop Grumman), ETG (Environmental Technology Group, now known as Smiths-Detection Edgewood, Inc.), and/ or Cepheid, and potentially others. These Bio-Threat Agent Detection Systems are intended to be used in conjunction with the mail sorting machines used by the USPS, in order for the USPS to test for particular bio-threat agents identified as being of interest to the USPS.

1.2   ABI Materials. The systems that are being provided are based on an assay called the 5 nuclease detection process, a process employing in part the polymerase chain reaction (PCR), herein called Real-Time PCR. Due to licensing constraints imposed by Roche Molecular Systems, Inc. and F. Hoffman La Roche Ltd (collectively, Roche), the owner of some of the patents for the Real-Time PCR process, certain rules must be followed in order for Cepheid and the USPS to be properly licensed under the Real-Time PCR patents as contemplated by this Agreement. [***]ABI owns other rights related to the Real-Time PCR process [***].

1.3   Intellectual Property Objectives. It is the Parties intention that through this Agreement and the parties existing Thermal Cycler Supplier Agreement obtained from ABI, under which Cepheid is authorized by ABI under certain of the PCR Rights to manufacture and sell thermal cyclers, and under which Cepheid manufactures and sells its GeneXpert thermal cycler instrument, the Bio-Threat Agent Detection Systems to be sold to the USPS will be fully licensed or otherwise manufactured and sold with all necessary authority under all PCR related intellectual property rights of ABI as well as Roche.

1.4   Prior Work by Cepheid. Cepheid has been working in collaboration with the USPS and Northrop Grumman to develop an initial assay to be used in conjunction with the GeneXpert Module in order to test for certain strains of Bacillus anthracis (anthrax) of interest to the USPS. Those parties have undertaken significant initial validation studies in order to satisfy the requirements of the USPS and, as part of those development activities, certain Third Party Materials have been and are being used. Cepheid and ABI now wish to develop and employ Products in which ABI PCR Materials will be used instead of such Third Party Materials so that certain anticipated advantages of ABI PCR Materials may be realized, but recognize that the already validated initial assay will be used during the initial period of implementation by the USPS. The parties will use their respective commercially reasonable efforts to demonstrate to the USPS that Products using ABI PCR Materials will meet or exceed all USPS requirements and specifications and that such Products should be accepted instead of those using the initial materials. It should be noted, however, that the ultimate decision as to whether to switch to ABI PCR Materials may be within the discretion of the USPS. The Parties have begun to explore the use of ABI PCR Materials and have determined to engage in the Joint Development Program to

The symbol [***] is used to indicate that a portion of the exhibit has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portion.

develop, qualify and validate them for use as the reagent components of Products, so that a new, validated assay using ABI materials and employing their anticipated advantages may be substituted for the initial assay as soon as feasible, preferably within six months of the Effective Date.

1.5   Special Format Assay. An important feature of this program for the USPS is the special format of the reagent kit for performing the assay. Cepheid has developed a method of drying the liquid reagents into a pelletized form. The dried pellets can be placed into a proprietary self-contained cartridge developed by Cepheid, in which the reagents can be reconstituted at the time that the assay is to be performed. The cartridge itself has significant added value, in that it is the vessel in which the anthrax spores are cracked and in which Real-Time PCR is performed.

1.6   Purpose. The Parties wish to enter into this Agreement to set forth the terms and conditions under which development of the initial validated system described above will be completed, development of second generation Products will be undertaken, and designated systems will be manufactured and supplied to the USPS by ABI, either directly or through Cepheid as a distributor of ABI, or Northrop Grumman or another Third Party or Third Parties distributors or subdistributors.

Now therefor, the Parties, in consideration of the mutual obligations hereinafter set forth and intending to be legally bound, hereby agree as follows:

2.     Definitions. Within the meaning of this Agreement:

2.1   ABI PCR Materials means reagents or reagent components, including labeled and unlabeled oligonucleotides (such as, without limitation, primers and probes) used in or useful for Real Time PCR, and the polymerase used for the Real Time PCR that ABI supplies to Cepheid as the packer of Cartridges pursuant to the Cartridge Packing Agreement for incorporation and use by the USPS in the Bio-Threat Agent Detection Systems of which Products are a component, and that ABI manufactures itself or that, on or after the date that Second Generation Products are fully substituted for initial Products as the Products that are manufactured and sold to the USPS pursuant to the Distributor Agreement, ABI sources itself or selects and designates as the Materials to be included in Products. Without limiting the scope of other materials excluded from the definition of ABI PCR Materials, the Parties understand and agree that specifically excluded from ABI PCR Materials are reagent and reagent components (but not the polymerase, which in all cases is included in ABI PCR Materials) that Cepheid has obtained from the supplier or suppliers used by Cepheid for such materials as of the Effective Date, even if ABI obtains such reagents and reagent components from such suppliers or other suppliers and supplies them to Cepheid pursuant to the Cartridge Packing Agreement, except for such of such reagent and reagent components, if any, as ABI specifically selects and designates to be included in Second Generation Products.

2.2   Affiliate of a Party or other person or entity means any corporation, firm, partnership or other entity, whether de jure or de facto, which directly or indirectly owns, is owned by or is under common ownership with such Party or other person or entity to the extent of more than fifty percent of the equity having the power to vote on or direct the affairs of the entity, or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction.

2.3   Authorized Use means use by the USPS for the detection of anthrax, and such other bio-threat agents as the Parties may agree in writing are bio-threat agents to be detected by Products, in the environment in accordance with the label license set forth in Section 6.3, or such other label license or limitations as ABI may designate (provided that the Authorized Use stated on the label license set forth in Section 6.3 is not diminished) or the Parties may agree upon in writing and which is applicable to the USPS use of Products. Authorized use shall not mean use for human diagnostic or therapeutic purposes.

The symbol [***] is used to indicate that a portion of the exhibit has been omitted and filed separately with the commission. Confidential treatment has been requested with respect to the omitted portion.
 

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