CONFIDENTIAL
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DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
BY AND BETWEEN
THIRD WAVE TECHNOLOGIES, INC.
AND
ACLARA BIOSCIENCES, INC.
DATED OCTOBER 24, 2001
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Confidential treatment has been requested for portions of this exhibit. The 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.
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS2
1.1. "ACLARA COMPONENT" ..................................... 2
1.2. "ACLARA MARKS" ......................................... 2
1.3. "ACLARA PARTNER" ....................................... 2
1.4. "ACLARA TECHNOLOGY" .................................... 2
1.5. "AFFILIATE" ............................................ 2
1.6. "APPROVED PRODUCT" ..................................... 3
1.7. "[ * ] INSTRUMENT" ..................................... 3
1.8. "CLEAVASE ENZYME" ...................................... 3
1.9. "COLLABORATION PRODUCT" ................................ 3
1.10. "COMMERCIAL LAUNCH" .................................... 3
1.11. "COMMERCIALIZATION COSTS" .............................. 3
1.12. "COMMERCIALIZING PARTY" ................................ 4
1.13. "COMMERCIALIZATION PLAN AND BUDGET" .................... 4
1.14. "COMMERCIALIZATION TEAM LEADER" ........................ 4
1.15. "CONTROLLED AFFILIATE" ................................. 4
1.16. "COVER" ................................................ 4
1.17. "CUSTOMER" ............................................. 4
1.18. "DEVELOPMENT COMMITTEE" ................................ 4
1.19. "DEVELOPMENT COSTS" .................................... 4
1.20. "DEVELOPMENT PERSONNEL" ................................ 4
1.21. "DEVELOPMENT PLAN AND BUDGET" .......................... 4
1.22. "DEVELOPMENT PROGRAM" .................................. 5
1.23. "DEVELOPMENT RATE" ..................................... 5
1.24. "DEVELOPMENT TERM" ..................................... 5
1.25. [ * ] .................................................. 5
1.26. "EARLY ACCESS PROGRAM" ................................. 5
1.27. "ETAG PRODUCT" ......................................... 5
1.28. "ETAG SIGNAL PROBE" .................................... 5
1.29. "EXCLUSIVE CONTROL" .................................... 5
1.30. "EXCLUSIVE TARGET ROYALTY" ............................. 5
1.31. "FIELD" ................................................ 5
1.32. "FINANCE SUB-COMMITTEE" ................................ 6
1.33. "FTE" OR "FULL-TIME EQUIVALENT" ........................ 6
1.34. "GAAP" ................................................. 6
1.35. "GENOTYPING APPLICATIONS" .............................. 6
1.36. "INTELLECTUAL PROPERTY RIGHTS" ......................... 6
1.37. "INTELLECTUAL PROPERTY SUB-COMMITTEE" .................. 6
1.38. "INVADER PROBE" ........................................ 6
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1.39. "INVADER REACTION" ..................................... 6
1.40. "JOINT DISTRIBUTOR" .................................... 6
1.41. "JOINT MARK" ........................................... 6
1.42. "JOINT PRODUCT FORECAST" ............................... 7
1.43. "JOINT STEERING COMMITTEE" ............................. 7
1.44. "LICENSABLE" ........................................... 7
1.45. "MANUFACTURING COSTS" .................................. 7
1.46. "MANUFACTURING PARTY" .................................. 7
1.47. "MARKETING DISTRIBUTOR" ................................ 8
1.48. [ * ] .................................................. 8
1.49. "MILESTONE" ............................................ 8
1.50. "MULTI-TARGET ANALYSIS" ................................ 8
1.51. "MULTI-TARGET ETAG PROBE SET" .......................... 8
1.52. "NET SALES" ............................................ 8
1.53. "NON-COMMERCIALIZING PARTY" ............................ 9
1.54. "NON-EXCLUSIVE CONTROL" ................................ 9
1.55. "NON-EXCLUSIVE TARGET ROYALTY" ......................... 9
1.56. "NON-HYBRIDIZING REGION" ............................... 9
1.57. "PATENT RIGHTS" ........................................ 9
1.58. "PRIMARY PROBE" ........................................ 9
1.59. "PROJECT LEADER" ....................................... 10
1.60. "PROPRIETARY TARGET ROYALTY" ........................... 10
1.61. [ * ] .................................................. 10
1.62. "SALES GOAL" ........................................... 10
1.63. "SOFTWARE" ............................................. 10
1.64. "SPECIFICATIONS" ....................................... 10
1.65. "TARGET" ............................................... 11
1.66. "TARGET FEES" .......................................... 11
1.67. "TECHNOLOGY" ........................................... 11
1.68. "TWT TECHNOLOGY" ....................................... 11
1.69. "TWT MARKS" ............................................ 11
1.70. "VALID CLAIM" .......................................... 11
ARTICLE 2 DEVELOPMENT PROCEDURES ......................................... 12
2.1. PROJECT LEADERS ........................................ 12
2.2. DEVELOPMENT COMMITTEE .................................. 13
ARTICLE 3 DEVELOPMENT PLAN AND BUDGET .................................... 14
3.1. GENERAL ................................................ 14
3.2. CONTENTS ............................................... 15
3.3. PERIODIC REVIEWS ....................................... 15
3.4. DEVELOPMENT PRIORITIES ................................. 15
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3.5. EXPANSION OF THE FIELD ................................. 15
ARTICLE 4 DEVELOPMENT PROGRAM ............................................ 15
4.1. DEVELOPMENT PROGRAM .................................... 15
4.2. [ * ] INSTRUMENTS ...................................... 16
4.3. PROPRIETARY TARGETS .................................... 16
4.4. CHANGES ................................................ 18
4.5. EXTENSION OF MILESTONE DATES ........................... 18
4.6. DEVELOPMENT REPORTS AND RECORDS ........................ 18
4.7. DEVELOPMENT TERM ....................................... 19
4.8. DEVELOPMENT PROGRAM LICENSES ........................... 19
4.9. THIRD PARTY TECHNOLOGY ................................. 19
4.10. AGREEMENTS WITH EMPLOYEES AND SUBCONTRACTORS ........... 20
4.11. VISITING PERSONNEL ..................................... 20
4.12. EQUIPMENT OWNERSHIP .................................... 20
ARTICLE 5 FUNDING OF DEVELOPMENT PROGRAM ................................. 20
5.1. FUNDING ................................................ 20
5.2. DEVELOPMENT RATE ....................................... 20
5.3. OTHER APPROVED DEVELOPMENT COSTS ....................... 21
5.4. PAYMENT ................................................ 21
5.5. EXCESS COSTS ........................................... 21
5.6. RECONCILIATION ......................................... 22
ARTICLE 6 JOINT STEERING COMMITTEE AND COMMERCIALIZATION PLAN
AND BUDGET ..................................................... 22
6.1. GENERAL ................................................ 22
6.2. COMMERCIALIZATION TEAM LEADER .......................... 22
6.3. [INTENTIONALLY OMITTED] ................................ 23
6.4. JOINT STEERING COMMITTEE ............................... 23
6.5. FINANCE SUB-COMMITTEE .................................. 25
6.6. COMMERCIALIZATION PLAN AND BUDGET ...................... 25
6.7. FUNDING OF COMMERCIALIZATION ACTIVITIES ................ 27
6.8. JOINT PRODUCT FORECASTS AND ORDERS ..................... 29
ARTICLE 7 COMMERCIALIZATION .............................................. 29
7.1. GENERAL RESPONSIBILITIES ............................... 29
7.2. SALES GOALS ............................................ 30
7.3. COMMERCIAL LAUNCH ...................................... 30
7.4. MARKETING AND DISTRIBUTION BY TWT ...................... 30
7.5. MARKETING AND DISTRIBUTION BY ACLARA ................... 31
7.6. INDIRECT DISTRIBUTION .................................. 31
7.7. NO OTHER DISTRIBUTION RIGHTS ........................... 32
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7.8. PRODUCT CONFIGURATIONS ................................. 32
7.9. MARKETING MATERIALS AND PRESENTATIONS .................. 32
7.10. CUSTOMER AGREEMENTS .................................... 32
7.11. THIRD PARTY PATENTS .................................... 33
7.12. PACKAGING AND LABELING ................................. 33
7.13. CUSTOMER RESTRICTIONS .................................. 34
7.14. CUSTOMER SUPPORT AND WARRANTIES ........................ 34
7.15. INTERNAL USE ........................................... 34
ARTICLE 8 COMMERCIALIZATION ECONOMICS .................................... 35
8.1. INITIAL PAYMENTS ....................................... 35
8.2. ACCOUNTING DEFINITIONS ................................. 35
8.3. ACCOUNTING BASED ON SALES .............................. 36
8.4. PROPRIETARY TARGET ROYALTIES ........................... 37
8.5. PROPRIETARY TARGET OFFSETS ............................. 38
8.6. BUNDLING ............................................... 39
8.7. OTHER THIRD PARTY ROYALTIES ............................ 39
ARTICLE 9 TRADEMARKS AND BRANDING ........................................ 39
9.1. JOINT MARKS ............................................ 39
9.2. CO-BRANDING ............................................ 40
ARTICLE 10 MANUFACTURING ................................................. 42
10.1. LICENSES ............................................... 42
10.2. RESTRICTIONS ........................................... 42
10.3. RESPONSIBILITIES ....................................... 42
10.4. ECONOMICS .............................................. 43
10.5. PRODUCT CHANGES ........................................ 43
ARTICLE 11 SUPPLY OF ACLARA COMPONENTS ................................... 44
11.1. TERMS AND CONDITIONS ................................... 44
11.2. SUPPLY ................................................. 44
11.3. FORECASTS .............................................. 44
11.4. ORDERS ................................................. 45
11.5. COMPENSATION ........................................... 45
11.6. DELIVERY ............................................... 45
11.7. INVOICING .............................................. 46
11.8. QUALITY AND QUALITY CONTROL ............................ 46
11.9. INSPECTION/REJECTION ................................... 46
11.10. PRODUCT WARRANTY ....................................... 47
11.11. SHORTAGE OF SUPPLY OF ACLARA COMPONENTS ................ 47
11.12. THIRD PARTY CONTRACTORS ................................ 50
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ARTICLE 12 SUPPLY OF APPROVED PRODUCTS ................................... 50
12.1. TERMS AND CONDITIONS ................................... 50
12.2. SUPPLY ................................................. 50
12.3. FORECASTS .............................................. 51
12.4. ORDERS ................................................. 52
12.5. CONSIDERATION .......................................... 52
12.6. DELIVERY ............................................... 53
12.7. INVOICING .............................................. 53
12.8. QUALITY AND QUALITY CONTROL ............................ 53
12.9. INSPECTION/REJECTION ................................... 53
12.10. PRODUCT WARRANTY ....................................... 54
12.11. SHORTAGE OF SUPPLY OF APPROVED PRODUCTS ................ 54
12.12. THIRD PARTY CONTRACTORS ................................ 58
ARTICLE 13 PAYMENTS; REPORTS; RECORDS .................................... 59
13.1. RECONCILIATION ......................................... 59
13.2. INITIAL PAYMENT UPON MANUFACTURE OF APPROVED
PRODUCTS ............................................... 59
13.3. SUPPLY OF ACLARA COMPONENTS AND APPROVED PRODUCTS
TO TWT ................................................. 59
13.4. SUPPLY OF CLEAVASE ENZYME AND APPROVED PRODUCTS
TO ACLARA .............................................. 59
13.5. PAYMENTS FOR INTERNAL USE BY THE MANUFACTURING
PARTY .................................................. 59
13.6. PAYMENT METHOD ......................................... 60
13.7. CURRENCY CONVERSION .................................... 60
13.8. RECORDS; INSPECTION .................................... 60
13.9. TAXES .................................................. 61
ARTICLE 14 INTELLECTUAL PROPERTY ......................................... 62
14.1. OWNERSHIP .............................................. 62
14.2. PROSECUTION OF SOLELY OWNED PATENT RIGHTS .............. 64
14.3. PROSECUTION OF JOINTLY OWNED PATENT RIGHTS ............. 64
ARTICLE 15 CONFIDENTIALITY ............................................... 66
15.1. CONFIDENTIAL INFORMATION ............................... 66
15.2. PERMITTED USE AND DISCLOSURE ........................... 67
15.3. CONFIDENTIAL TERMS/PUBLICITY ........................... 67
15.4. PROPRIETARY MARKINGS ................................... 67
ARTICLE 16 REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS .................. 68
16.1. GENERAL ................................................ 68
16.2. BY TWT ................................................. 68
16.3. BY ACLARA .............................................. 68
16.4. DISCLAIMERS ............................................ 68
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ARTICLE 17 INDEMNIFICATION ............................................... 69
17.1. INDEMNIFICATION OF TWT ................................. 69
17.2. INDEMNIFICATION OF ACLARA .............................. 70
17.3. PROCEDURE .............................................. 70
ARTICLE 18 DISPUTE RESOLUTION ............................................ 71
18.1. DISPUTES ............................................... 71
18.2. FULL ARBITRATION ....................................... 71
18.3. SHORT FORM ARBITRATION ................................. 72
18.4. COMMERCIALIZATION PLAN AND BUDGET DISPUTE
RESOLUTION ............................................. 73
ARTICLE 19 TERM AND TERMINATION .......................................... 74
19.1. TERM ................................................... 74
19.2. NO APPROVAL FOR COMMERCIAL LAUNCH ...................... 74
19.3. TERMINATION FOR CAUSE .................................. 74
19.4. [INTENTIONALLY OMITTED] ................................ 75
19.5. EFFECT OF TERMINATION .................................. 75
ARTICLE 20 GENERAL ....................................................... 80
20.1. NO OTHER RIGHTS ........................................ 80
20.2. GOVERNING LAW AND JURISDICTION ......................... 80
20.3. ASSIGNMENT ............................................. 80
20.4. INDEPENDENT CONTRACTORS ................................ 81
20.5. FORCE MAJEURE .......................................... 81
20.6. NOTICES ................................................ 81
20.7. COMPLIANCE WITH LAWS ................................... 82
20.8. ARTICLE AND SECTION HEADINGS, LANGUAGE AND
CONSTRUCTION ........................................... 82
20.9. MODIFICATION AND WAIVER ................................ 82
20.10. SEVERABILITY ........................................... 83
20.11. ENTIRE AGREEMENT ....................................... 83
20.12. FURTHER ASSURANCES ..................................... 83
20.13. BANKRUPTCY ............................................. 84
20.14. COUNTERPARTS ........................................... 84
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DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
This Development and Commercialization Agreement (the "AGREEMENT"),
effective as of October 24, 2001 (the "EFFECTIVE DATE"), is made by and between
Third Wave Technologies, Inc., a Delaware corporation, having a place of
business at 502 S. Rosa Road, Madison, WI 53719 ("TWT"), and ACLARA BioSciences,
Inc., a Delaware corporation, having a place of business at 1288 Pear Avenue,
Mountain View, CA 94043 ("ACLARA") (each a "PARTY;" together the "PARTIES").
BACKGROUND
A. TWT has technology and intellectual property for, among other
things, genetic analysis, including test kits, components, and other products
and services based upon its proprietary Invader(R) platform, and is in the
business of manufacturing and commercializing such products, components and
services.
B. Similarly, ACLARA has technology and intellectual property for,
among other things, genetic analysis and biopharmaceutical research, including
products and components based upon ACLARA's proprietary eTag(TM) technology.
C. On the terms and conditions set forth below, ACLARA and TWT desire
to collaborate to develop and commercialize assay kits for use on [ * ]
instruments commercially available from third parties to perform simultaneous
multiple gene expression and/or genotyping assays, each assay testing for a
unique analyte, using ACLARA's eTag(TM) technology in TWT's Invader(R) platform.
D. Additionally, TWT has built up significant manufacturing capacities
and capabilities for assay kits which the Parties intend to utilize, to the
extent mutually agreed, to manufacture the co-developed assay products
hereunder, all on the terms and conditions set forth below.
E. The Parties acknowledge that the arrangement set forth in this
Agreement is intended to make available to customers a wider range and variety
of products than would have been available in the time frames contemplated
herein in the absence of the collaboration between the Parties.
NOW, THEREFORE, for and in consideration of the covenants, conditions
and undertakings hereinafter set forth, TWT and ACLARA each agree as follows:
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[ * ] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
1.1. "ACLARA COMPONENT" shall mean an ACLARA Precursor in a [ * ]. As
used herein, "ACLARA Precursors" shall mean [ * ].
1.2. "ACLARA MARKS" shall mean the trademarks, trade names, and logos
of ACLARA set forth in Exhibit 1.2, as amended by ACLARA from time to time in
accordance with this Agreement. ACLARA uses "eTag" as a trademark of ACLARA, but
such term is printed in this Agreement without the (TM) mark for convenience.
1.3. "ACLARA PARTNER" shall mean a non-Affiliate third party entity
that ACLARA has proposed to TWT in writing be authorized by TWT to distribute
Approved Products under this Agreement concurrently with the distribution, as
authorized by ACLARA, of [ * ].
1.4. "ACLARA TECHNOLOGY" shall mean the ACLARA Patents and ACLARA
Technical Information.
1.4.1 "ACLARA PATENTS" shall mean all Patent Rights owned or
Licensable by ACLARA or its Controlled Affiliates during the term of this
Agreement which would, absent a license or other authorization from the owner of
such Patent Rights, be infringed by the composition, manufacture, sale, use,
importation, or other exploitation of an Approved Product (or any component
thereof).
1.4.2 "ACLARA TECHNICAL INFORMATION" shall mean all Technology
disclosed by ACLARA directly to TWT during the term of this Agreement to the
extent it relates to the composition, manufacture, sale, use, importation, or
other exploitation of an Approved Product, and trade secret rights to the extent
embodied in such Technology that are proprietary to or Licensable by ACLARA or
its Controlled Affiliates.
1.5. "AFFILIATE" shall mean any entity which controls, is controlled by
or is under common control with the applicable entity for so long as such
control exists. For purposes of this definition, "control" shall mean beneficial
ownership of fifty percent (50%) or more 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).
A "CONTROLLED AFFILIATE" shall mean an entity that is controlled by a Party to
this Agreement.
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with the Securities and Exchange Commission. Confidential treatment has been
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1.6. "APPROVED PRODUCT" shall mean a Collaboration Product for which
the Parties have agreed in writing upon a Specification and that is developed by
the Parties under this Agreement, which Collaboration Product (i) consists of a
Multi-Target eTag Probe Set, Cleavase Enzyme, and appropriate buffers, all as
specified in the Specification for such Collaboration Product and (ii) is
designed and intended for use to perform the particular Multi-Target Analysis,
producing the resulting eTag Products, using a [ * ] Instrument, each as set
forth in such Specifications. For clarity, each Approved Product shall be
limited to, and include, [ * ] as set forth in such Specifications.
Notwithstanding anything to the contrary, Approved Product shall not mean any [
* ]t.
1.7. "[ * ] INSTRUMENT" shall mean any instrument, other than a [ * ]
on samples which is generally commercially available from a third party during
the term of this Agreement and which is suitable for use to separate in the same
solution multiple products by molecular weight and charge, including those
resultant eTag Products that arise from performing multiple genotyping and/or
gene expression analyses simultaneously in such a solution, and is suitable for
detecting and/or quantifying each of such multiple eTag Products. [ * ]
Instrument shall include the instruments identified in Exhibit 1.7.
1.8. "CLEAVASE ENZYME" shall mean any enzyme that (A) has the ability
to recognize the structure formed by the hybridization of an Invader Probe and a
Primary Probe to their cognate Target sequence such that the Invader Probe
overlaps, at its 3' terminus by at least one nucleotide, the duplex formed by
the hybridization of the Primary Probe to the complementary region of the
Target; (B) has the ability to [ * ]. It is acknowledged and agreed that
Cleavase Enzyme shall include the enzymes having the three properties described
in (A), (B), and (C) of this Section 1.8 above, regardless of whether or not the
enzyme has other properties or uses, including [ * ]. Cleavase Enzyme shall
include those enzymes identified on Exhibit 1.8, as may be updated from time to
time by TWT.
1.9. "COLLABORATION PRODUCT" shall mean a kit that is designed and
intended for use to perform a Multi-Target Analysis, producing the resulting
eTag Products to be analyzed by a [ * ] Instrument.
1.10. "COMMERCIAL LAUNCH" shall mean, with respect to each Approved
Product, the first bona fide commercial sale of such Approved Product to a
non-Affiliate third party in any country of the world in a fully arms length
transaction by or under authority of a Party or its Marketing Distributor,
including Joint Partners and ACLARA Partners, and including distribution under
the Early Access Program.
1.11. "COMMERCIALIZATION COSTS" shall have the meaning set forth in
Exhibit 1.11.
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1.12. "COMMERCIALIZING PARTY" shall mean, with respect to each
particular unit of Approved Product, the Party that actually distributed such
unit to a Customer or to a Marketing Distributor.
1.13. "COMMERCIALIZATION PLAN AND BUDGET" shall mean the plan and
budget in effect from time to time for commercialization of the Approved
Products, as established and modified by the Joint Steering Committee in
accordance with Article 6.
1.14. "COMMERCIALIZATION TEAM LEADER" shall have the meaning set forth
in Section 6.2.
1.15. "CONTROLLED AFFILIATE" shall have the meaning as set forth in
Section 1.5.
1.16. "COVER" shall mean that, with respect to any Target, the
composition, manufacture, use, sale, offer for sale, importation, or other
exploitation of such Target would infringe at least one Valid Claim of the
applicable Patent Rights absent a license or other authorization from the owner
of such Patent Rights. Notwithstanding anything to the contrary, Patent Rights
shall be deemed to Cover a Target for purposes of this Agreement to the extent
that the Party or its Controlled Affiliate having rights under the Patent Rights
[ * ] to a non-Affiliate third party for a license under such Patent Rights as a
result of the manufacture, use, sale, offer for sale, importation, or other
exploitation hereunder of the Approved Product designed to detect and/or
quantify such Target.
1.17. "CUSTOMER" shall mean an end user customer that purchases an
Approved Product for its own use, including to provide services to others, and
not for further distribution.
1.18. "DEVELOPMENT COMMITTEE" shall have the meaning defined in Section
2.2 below.
1.19. "DEVELOPMENT COSTS" shall mean the total of (i) the hours
actually expended by Development Personnel of a Party in order to perform the
Party's responsibilities in accordance with the Development Plan and Budget
multiplied by the Development Rate in effect at the time such hours are
incurred; and (ii) such other costs and expenses actually incurred by such Party
in performing its responsibilities under the Development Program to the extent
set forth in Section 5.3.
1.20. "DEVELOPMENT PERSONNEL" shall mean employees and subcontractors
of a Party assigned (full- or part-time) to conduct development or other work
under the Development Program, including Project Leaders, scientists, research
and manufacturing staff, quality control and assurance personnel, technicians or
the like, but excluding non-technical, non-professional personnel such as
secretarial or administrative staff.
1.21. "DEVELOPMENT PLAN AND BUDGET" shall mean the plan and budget in
effect from time to time for the Development Program, as established and
modified by the Development Committee in accordance with Articles 2, 3 and 4.
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1.22. "DEVELOPMENT PROGRAM" shall have the meaning set forth in Section
4.1.
1.23. "DEVELOPMENT RATE" shall mean the FTE rate for determining
Development Costs as set forth in Section 5.2.
1.24. "DEVELOPMENT TERM" shall have the meaning set forth in Section
4.7.
1.25. [ * ]
1.26. "EARLY ACCESS PROGRAM" shall have the meaning set forth in
Section 6.6.4.
1.27. "ETAG PRODUCT" shall mean a molecule consisting of [ * ].
1.28. "ETAG SIGNAL PROBE" shall mean a [ * ].
1.29. "EXCLUSIVE CONTROL" shall mean that the applicable Party or its
Controlled Affiliate (i) solely owns all right, title, and interest in and to
Patent Rights Covering a Target reasonably sufficient to exclude all others from
the manufacture, and from the sale, in the applicable country of all generally
commercially available products to detect and/or quantify such Target, or (ii)
has a license under Patent Rights Covering a Target of the applicable Approved
Product to make, use, sell, offer to sell, and import the Approved Product in
the applicable country, which rights are exclusive (including with respect to
the licensor and all third parties) reasonably sufficient to exclude all others
from the manufacture, and from the sale, in the applicable country of all
generally commercially available products to detect and/or quantify such Target.
Notwithstanding the foregoing, rights retained by a government entity, or rights
retained by a licensor for non-commercial applications, shall not be considered
for purposes of determining whether or not the applicable Party or its
Controlled Affiliate has Exclusive Control. A Party or its Controlled Affiliate,
as applicable, shall be required to have rights to enforce the applicable Patent
Rights, however, in order to qualify as having Exclusive Control; provided that
such enforcement rights with respect to Patent Rights licensed from another
entity may be backup rights that are triggered only if the licensor (or others
on its behalf) does not enforce the Patent Rights.
1.30. "EXCLUSIVE TARGET ROYALTY" shall mean, with respect to each
Target Exclusively Controlled by a Party or its Controlled Affiliate to which an
Approved Product is directed, an amount equal to the greater of (i) and (ii)
below, divided by the total number of Targets to which the Approved Product is
directed: (i) [ * ] percent [ * ] of the Net Sales based upon the sale by the
Commercializing Party or its Affiliate of such Approved Product directly to a
Customer or to a Marketing Distributor in the country where so Exclusively
Controlled; or (ii) (X + Y), where X is equal to the [ * ], and Y is [ * ]
percent of such Net Sales. For purposes of this Agreement, an Approved Product
shall be considered directed only to the Targets set forth in its
Specifications.
1.31. "FIELD" shall mean all research applications for nucleic acid
analysis concerning [ * ], including such research applications involving [ * ];
but excluding [ * ].
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1.32. "FINANCE SUB-COMMITTEE" shall mean the committee described in
Section 6.5.
1.33. "FTE" or "FULL-TIME EQUIVALENT" shall mean a dedicated full-time
employee or contractor of ACLARA or TWT, as the case may be, or in the case of
less than a full-time dedicated person, a full-time, equivalent person year,
each based upon the total of one thousand eight hundred eighty (1,880) hours per
year of work on activities under the Development Program.
1.34. "GAAP" shall mean the then-current applicable Generally Accepted
Accounting Principles in the United States consistently applied as recognized or
accepted by the United States Securities and Exchange Commission and the
Financial Accounting Standards Board. As used herein, "GAAP" shall also include
cost accounting principles and procedures that are generally accepted in the
United States.
1.35. "GENOTYPING APPLICATIONS" shall mean use of an Approved Product
for purposes of detection and/or quantification of a DNA Target.
1.36. "INTELLECTUAL PROPERTY RIGHTS" shall mean any and all rights in,
to, or arising out of any (i) Patent Rights; (ii) trade secrets or know how;
(iii) copyrights, copyright registrations, or any application therefor, in the
U.S. or any foreign country, or any other right corresponding thereto throughout
the world, including moral rights; or (iv) any other intellectual property or
proprietary right anywhere in the world.
1.37. "INTELLECTUAL PROPERTY SUB-COMMITTEE" shall mean the committee
described in Section 14.3.2(ii).
1.38. "INVADER PROBE" shall mean an oligonucleotide probe comprising
(A) a region complementary to, and designed to hybridize to, the 3' portion of
the Target; and (B) an additional region (the "OVERLAP REGION") located on the
3' end of such oligonucleotide probe, which Overlap Region adjoins the foregoing
complementary region and comprises one or more nucleotides or other structural
moieties that overlaps the duplex formed by the hybridization [ * ]. The Overlap
Region may be complementary or non-complementary to the Target.
1.39. "INVADER REACTION" shall mean the reaction occurring as a result
of the recognition and cleavage by a Cleavase Enzyme of the structure formed by
the hybridization of a nucleic acid with one or more oligonucleotide probes.
1.40. "JOINT DISTRIBUTOR" shall mean a non-Affiliate third party entity
that is authorized by the Joint Steering Committee to distribute Approved
Products under this Agreement.
1.41. "JOINT MARK" shall have the meaning set forth in Section 9.1.
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1.42. "JOINT PRODUCT FORECAST" shall have the meaning set forth in
Section 6.8.
1.43. "JOINT STEERING COMMITTEE" shall have the meaning set forth in
Section 6.4 below.
1.44. "LICENSABLE" shall mean ownership or possession of the power and
authority to grant a license or sublicense of, or within, the scope provided for
herein with respect to the particular subject matter, without violating the
agreement or arrangement with a non-Affiliate third party under which the
applicable Party or its Controlled Affiliate acquired or generated such subject
matter. This Section 1.44 does not imply or create any obligation of a Party or
its Controlled Affiliate to obtain rights for the other Party when negotiating
such agreements or arrangements with such third parties.
1.45. "MANUFACTURING COSTS" shall mean (i) the Manufacturing Party's
total direct and indirect costs associated with the manufacture or preparation
of the particular Approved Product, Software, or component of the Approved
Product or Software, including: direct and indirect manufacturing overhead
(including reasonable indirect materials and scrap) and related support costs
for production engineering, quality assurance and control, process engineering
and materials management; overhead for facilities; costs of equipment; salary
and benefits associated with labor, including management salary and benefits;
general and administrative expenses; inventory costs and overhead; other
overhead; direct materials costs; costs of testing, packaging and labeling;
occupancy and manufacturing equipment depreciation and rents; and any other
costs commonly treated as manufacturing costs under GAAP, but excluding
allocations or charges for idle manufacturing capacity (I. E., manufacturing
capacity that is available for the production of Approved Products but not so
used); all calculated in accordance with GAAP; (ii) with respect to components
or materials acquired from a non-Affiliate vendor, the amounts paid to such
vendor, in each case including freight, insurance, shipping, packaging, and
other similar costs associated with acquiring such components or materials, as
well as costs of inspection, rejection, and return by the Manufacturing Party;
and (iii) with respect to components or materials acquired from an Affiliate for
an Approved Product or Software, the greater of (A) costs calculated in
accordance with (i) above, but for the Affiliate rather than the Manufacturing
Party; or (B) the amounts paid to such Affiliate in the manner set forth under
(ii) above. Notwithstanding the foregoing, Manufacturing Costs shall not include
the amounts paid by the Manufacturing Party to the other Party hereto as set
forth in Section 8.1.1 or 8.1.2 for ACLARA Components or Cleavase Enzymes, as
appropriate, but shall include amounts incurred by the Manufacturing Party for
freight, insurance, shipping, packaging, and other similar costs associated with
acquiring such ACLARA Components or Cleavase Enzymes, if applicable, as well as
costs of inspection, rejection, and return by the Manufacturing Party. For
purposes of determining Manufacturing Costs, costs shall not be shifted,
allocated or weighted in any manner that overstates or unfairly increases the
costs allocated to the particular Approved Product, Software or ACLARA
Component, as applicable.
1.46. "MANUFACTURING PARTY" shall mean, with respect to each particular
unit of Approved Product, the Party, or third party contract manufacturer if
applicable, that manufactures into final form such Approved Product for
distribution hereunder. For avoidance of doubt, neither Party shall be
considered to be a Manufacturing Party under this Agreement as a result of the
manufacture and
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supply to the other Party, or such third party contract manufacturer, of any
components used by such other Party or contract manufacturer in the manufacture
of the Approved Product.
1.47. "MARKETING DISTRIBUTOR" shall mean a non-Affiliate third party
authorized directly by a Party pursuant to a written agreement to distribute an
Approved Product in accordance with this Agreement, including ACLARA Partners
and Joint Distributors; provided however that each such third party shall be
considered a Marketing Distributor only to the extent that the Approved Products
purchased by the third party are resold in fully arms length transactions to
Customers and are not exploited by such third party for any other purpose (e.g.,
in a service). Each such third party shall be considered a Customer with respect
to each Approved Product that it uses in any manner.
1.48. [ * ] shall mean a [ * ]. For avoidance of doubt, it is agreed
that a [ * ] shall not include [ * ].
1.49. "MILESTONE" shall mean a particular portion of the Development
Program, and associated deadline for completion of such portion, as set forth in
the Development Plan and Budget.
1.50. "MULTI-TARGET ANALYSIS" shall mean the performance, in a single
reaction vessel, of simultaneous Invader Reactions against a single sample for
the detection and/or quantification of [ * ] or more unique Targets in such
sample (i.e. each Target having a different nucleotide sequence) using a
Multi-Target eTag Probe Set, and physically separating the eTag Products
resulting from the Invader Reactions, where the recognition and measurement of
each such eTag Product, or lack thereof, corresponds to such detection and/or
quantification of one of the Targets in such sample.
1.51. "MULTI-TARGET ETAG PROBE SET" shall mean a set of paired
oligonucleotide1 probes, which set and probes are developed by the Parties under
this Agreement, and where each such pair of probes consists of an eTag Signal
Probe and an Invader Probe for the Invader Reaction necessary to detect and/or
quantify a unique Target.
1.52. "NET SALES" shall mean the total amount invoiced to Customers and
to Marketing Distributors on transfers of Approved Products, and transfers of
associated Software approved by the Development Committee or the Parties in
writing for use with an Approved Product, each transfer directly by a Party or
its Affiliates (the "SELLER") to a Customer or Marketing Distributor, as
applicable, less the following all as calculated in accordance with GAAP: (i)
all trade, cash and quantity credits, discounts, refunds or rebates; (ii)
amounts for claims, allowances or credits for returns; charge backs; and (iii)
packaging, handling fees and prepaid freight, sales taxes, duties and
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1 As used in this Agreement, (i) "obligonucleotide probe" shall refer to any
synthesized or otherwise manufactured sequence (of any length) of nucleotides,
including DNA, RNA, PNA, modified or synthesized nucleotides, universal bases,
adducts, or the like, or combinations thereof; and (ii) "nucleic acid" shall
refer to a sequence (of any length) of nucleotides whether synthesized or
naturally occurring, including oligonucleotide probes.
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other governmental charges (including value added tax), but excluding what is
commonly known as income taxes; provided that in the case of (i) and (ii), such
amounts are allowed by the Seller to, and actually taken by, the Customer or
Marketing Distributor, and in the case of (iii), such amounts are charged
separately on the invoice and paid by the Customer or Marketing Distributor. For
avoidance of doubt, Net Sales shall not include sales (A) by a Party to an
Affiliate to the extent that the Affiliate resells the Approved Product, or
Software, to a Customer or to a Marketing Distributor, or (B) by Marketing
Distributors to Customers.
1.53. "NON-COMMERCIALIZING PARTY" shall mean, with respect to each
particular unit of Approved Product distributed under this Agreement, the Party
that is not the Commercializing Party of that unit.
1.54. "NON-EXCLUSIVE CONTROL" shall mean that the applicable Party or
its Controlled Affiliate has rights in or to Patent Rights Covering a Target to
make, use, sell, offer to sell, and import the applicable Approved Product in
the applicable country, which rights are not Exclusive Control.
1.55. "NON-EXCLUSIVE TARGET ROYALTY" shall mean, with respect to each
Target Non-Exclusively Controlled by a Party or its Controlled Affiliate to
which an Approved Product is directed, an amount equal to the greater of (i) and
(ii) below, divided by the total number of Targets to which the Approved Product
is directed: (i) [ * ] percent ([ * ]%) of the Net Sales based upon the sale by
the Commercializing Party or its Affiliates directly to a Customer or to a
Marketing Distributor of such Approved Product in the country where so
Non-Exclusively Controlled; or (ii) (X + Y), where X is equal to [ * ], and Y is
[ * ] percent of such Net Sales.
1.56. "NON-HYBRIDIZING REGION" shall have the meaning as set forth in
Section 1.58.
1.57. "PATENT RIGHTS" shall mean any and all rights under any of the
following, whether existing now or in the future: (i) a United States,
international or foreign patent, utility model, design registration, certificate
of invention, patent of addition or substitution, or other governmental grant
for the protection of inventions or industrial designs anywhere in the world,
including any reissue, renewal, re-examination or extension thereof; and (ii)
any application for any of the foregoing, including any international,
provisional, divisional, continuation, continuation-in-part, or continued
prosecution application.
1.58. "PRIMARY PROBE" shall mean an oligonucleotide probe comprising
(A) a region complementary2 to, and designed to hybridize to, the 5' portion of
a Target; and (B) a non-hybridizing region located on the 5' end of such
oligonucleotide probe (the "NON-HYBRIDIZING
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1 As used herein, "complementary" allows for areas of non-complementarity
(i. e., one or more base pair mismatches) to the cognate sequence of the
applicable Target or nucleotide sequence.
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REGION"); which Non-Hybridizing Region adjoins with the foregoing complementary
region and may incorporate one or more nucleotides, [ * ].
1.59. "PROJECT LEADER" shall have the meaning set forth in Section
2.1.1.
1.60. "PROPRIETARY TARGET ROYALTY" shall mean an Exclusive Target
Royalty or a Non-Exclusive Target Royalty, as applicable.
1.61. [ * ]
1.62. "SALES GOAL" shall mean the total aggregate amount of Net Sales
that the Parties will attempt to generate from sales, both directly and
indirectly, of an Approved Product in a geographic region during a particular
period of time, all as expressly set forth in the Commercialization Plan and
Budget.
1.63. "SOFTWARE" shall mean, with respect to a particular Approved
Product, only the machine readable code version of associated functional and/or
bioinformatic software necessary or useful for the integration of the Approved
Product on a particular [ * ] Instrument, or for generation, analysis or
manipulation of the data generated from use of such Approved Product, in each
case as approved by the Development Committee (or after the Development Term by
written agreement of both Parties) for use with or as part of such Approved
Product, and including any machine readable updates, improvements or
modifications additionally furnished by the Commercializing Party for use with
an Approved Product.
1.64. "SPECIFICATIONS" shall mean:
1.64.1 with respect to each particular ACLARA Component, the written
specifications for the ACLARA Component as most recently approved by the
Development Committee in writing and as thereafter amended solely in accordance
with this Agreement;
1.64.2 with respect to each particular Cleavase Enzyme, the
written specifications for the Cleavase Enzyme as most recently approved by the
Development Committee in writing and as thereafter amended solely in accordance
with this Agreement;
1.64.3 with respect to each particular Approved Product, the
written specifications for the Approved Product as most recently approved by the
Development Committee in writing and as thereafter amended solely in accordance
with this Agreement; and
1.64.4 with respect to Software, the written specifications
for such Software as most recently approved by the Development Committee in
writing and as thereafter amended solely in accordance with this Agreement.
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1.65. "TARGET" shall mean, with respect to a particular Collaboration
Product (including Approved Products), individually each nucleic acid to be
detected and/or quantified by such Collaboration Product, which nucleic acid is
of a sufficient length to allow discrimination of other non-homologous nucleic
acids by an Invader Reaction.
1.66. "TARGET FEES" shall mean, with respect to a particular Target of
an Approved Product, either Exclusively Controlled or Non-Exclusively Controlled
by a Party or its Controlled Affiliate, as applicable, the total aggregate
amount of all running royalties actually paid in good faith by such Party and
its Controlled Affiliates (the "Licensee") to any and all third parties as a
result of the manufacture, use, sale, importation, distribution, or other
exploitation of such Approved Product hereunder under Patent Rights owned or
controlled by such third party that Cover the particular Target. In no event
shall Target Fees include any [ * ]
1.67. "TECHNOLOGY" shall mean any and all technology and technical
information, including without limitation data, inventions (whether or not
patented or patentable), knowledge, ideas, developments, prototypes, invention
disclosures, designs, processes, sequences, methods, techniques, materials,
instructions, formulas, compositions, chemistries, algorithms, know-how,
research, modifications, software, drawings, equipment, protocols, configuration
and process information, specifications, models, works of authorship,
improvements, and any other technical subject matter.
1.68. "TWT TECHNOLOGY" shall mean the TWT Patents and TWT Technical
Information.
1.68.1 "TWT PATENTS" shall mean all Patent Rights owned or
Licensable by TWT or its Controlled Affiliate during the term of this Agreement
which would, absent a license or other authorization from the owner of such
Patent Rights, be infringed by the composition, manufacture, sale, use,
importation, or other exploitation of an Approved Product (or a component
thereof).
1.68.2 "TWT TECHNICAL INFORMATION" shall mean all Technology
disclosed by TWT directly to ACLARA during the term of this Agreement to the
extent it relates to the composition, manufacture, sale, use, importation, or
other exploitation of an Approved Product, and trade secret rights to the extent
embodied in such Technology that are proprietary to or Licensable by TWT or its
Controlled Affiliate.
1.69. "TWT MARKS" shall mean the trademarks, trade names, and logos of
TWT set forth in Exhibit 1.69, as amended by TWT from time to time in accordance
with this Agreement. Invader(R) and Cleavase(R) are registered trademarks of TWT
but are printed without the registration mark in this Agreement for convenience.
1.70. "VALID CLAIM" shall mean (i) a claim of an issued and un-expired
patent which has not been held unenforceable or invalid by a court or other
governmental agency of competent
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jurisdiction (from which no appeal is or can be taken), and which has not been
disclaimed or admitted to be invalid or unenforceable through reissue or
otherwise; and (ii) a claim included in a pending patent application that is
being actively prosecuted and which has not been canceled, withdrawn from
consideration, finally determined to be unallowable by the applicable
governmental authority for whatever reason (and from which no appeal is or can
be taken), and/or abandoned. Notwithstanding the foregoing, Valid Claim shall
not include any claims [ * ].
ARTICLE 2
DEVELOPMENT PROCEDURES
2.1. PROJECT LEADERS.
2.1.1 APPOINTMENT. Each Party shall appoint a project leader
that is reasonably acceptable to the other Party ("PROJECT LEADER") who shall
serve as the primary point of communication and coordination between the Parties
with respect to the Development Program and shall be responsible for day to day
coordination of the Development Program internally at the appointing Party.
Subject to the foregoing, each Party shall have the right to replace its Project
Leader from time to time by providing prior written notice to the other Party.
The initial Project Leaders for the Parties shall be as follows:
TWT: ACLARA:
Name: [ * ] Name: [ * ]
Title: Director, Assay Title: Associate Director,
Development Genomics
Voice: [ * ] Voice: [ * ]
Fax: [ * ] Fax: [ * ]
2.1.2 RESPONSIBILITIES. During the Development Term, the Project
Leaders shall meet to discuss the progress of the Development Program at least
weekly by phone or video conference, and in person at least once every calendar
month (with the location alternating between the facilities of ACLARA and TWT
unless otherwise agreed). The Project Leader for each Party shall act as the
chairperson of the Development Committee for such Party and shall keep the
Development Committee reasonably informed regarding such Party's progress under
the Development Program. Additionally, each Project Leader shall be responsible
for (i) monitoring the schedules and progress of the Development Program against
the Development Plan and Budget; (ii) discussing remedial measures if the
Project Leaders determine that the progress with respect to a
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particular Approved Product or a particular task (including Milestones) under
the Development Plan and Budget is unsatisfactory; (iii) receiving and
submitting requests for information, materials and/or assistance between the
Parties; (iv) preparing and providing quarterly written reports to the other
Party in accordance with Section 4.6.2; (v) coordinating the preparation and
providing each proposed Development Plan and Budget, when applicable, to the
other Development Committee members by October 1 of each calendar year; and (vi)
performing such other activities as approved by the Development Committee.
Approximately [ * ] hours of each Project Leader's time during each calendar
month of the Development Term shall be dedicated to such activities to the
extent necessary to perform the activities; it being understood that each
Project Leader shall devote greater time to such activities during the early
stages of the Development Program as is reasonably necessary in order to
establish communications and procedures and diligently commence the Development
Program. Such time commitment of the Project Leaders may be adjusted by written
agreement of the Parties from time to time.
2.2. DEVELOPMENT COMMITTEE. ACLARA and TWT shall establish a
development committee to oversee, review and coordinate the development of each
Approved Product, and the implementation of the Development Program, in
accordance with this Agreement (the "DEVELOPMENT COMMITTEE"). The Development
Committee shall be responsible for reviewing and approving (i) each Development
Plan and Budget, including Milestones and budgets; (ii) each Specification for
ACLARA Components, Software and Approved Products (including with respect to
Target designation for Approved Products); (iii) requested modifications to any
of the foregoing; (iv) Software for use with Approved Products and Approved
Products for Commercial Launch; and (v) such other matters as provided for in
this Agreement or as approved by the Joint Steering Committee. The Development
Committee shall also be responsible for cooperating with the Joint Steering
Committee by, among other things, (A) considering feedback and information from
the Joint Steering Committee regarding desired product strategy, planning, and
direction, (B) keeping the Joint Steering Committee informed regarding proposed
and potential Collaboration Products and the nature and status of Approved
Products under development, including giving projected timing for completion of
development, and (C) proceeding in accordance with instructions or requests
approved by the Joint Steering Committee. No Development Plan and Budget,
Specification, or modification thereto, shall be effective under this Agreement
until approved by the Development Committee.
2.2.1 MEMBERSHIP. The Development Committee shall consist of
four members, two appointed by ACLARA and two appointed by TWT. One member
appointed by each Party shall be the Project Leader as set forth in Section 2.1
above. At least one member appointed by each Party shall being an executive of
such Party at the vice president level or higher. Subject to the requirements in
this Section 2.2.1, each of TWT and ACLARA may replace its Development Committee
members at any time by providing prior written notice of the change to the other
Party.
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2.2.2 MEETINGS. During the Development Term, the Development
Committee shall meet in accordance with a mutually agreed upon schedule, no less
often than once each calendar month by teleconference and once each calendar
quarter in person. The first meeting of the Development Committee shall occur
within fifteen (15) days after the Effective Date. Unless otherwise agreed, the
location of the in person meetings shall alternate between ACLARA's notice
address and TWT's notice address under Section 20.6. At its meetings, the
Development Committee will (i) monitor and review the progress of the
Development Program, including progress toward meeting Milestones, (ii) discuss
changes in development direction, potential budget overruns, delays, and any
other matters concerning the Development Program reasonably identified by either
Party; and (iii) review the then current Specifications and Development Plan and
Budget for the Approved Products and Software, including component
specifications, under development, and consider proposed changes. Other
representatives of TWT and ACLARA may attend Development Committee meetings as
non-voting observers only with the approval of the Development Committee. Each
Party shall bear the costs and expenses of its personnel participating in
Development Committee meetings, including travel expenses.
2.2.3 DECISION MAKING. Decisions and approvals of the
Development Committee shall be made only by majority approval of all members,
either present or voting by proxy, with each member having one vote. The
Development Committee shall prepare a written record of all Development
Committee decisions which are to be binding upon the Parties, including
approvals of Approved Products for Commercial Launch, and approvals of, or
changes to, the Development Plan and Budget or Specifications. Such records
shall be considered approved by the Development Committee, and binding upon both
Parties, only if signed by both Parties. Except for such signed records, all
decisions and approvals of the Development Committee, and discussions at
Development Committee meetings, shall be for advisory and information purposes
only and shall not be binding upon either Party. If the Development Committee
has not resolved an issue regarding the Development Program after discussing the
issue in at least two (2) meetings, then either Party may refer the issue for
consideration and attempted resolution by the Joint Steering Committee by
providing written notice of such referral to the other Party. Unless otherwise
specified, "approved" by the Development Committee as used in this Agreement
means binding approval in accordance with this Section 2.2.3.
ARTICLE 3
DEVELOPMENT PLAN AND BUDGET
3.1. GENERAL. The Development Plan and Budget for the period through December
31, 2002 is set forth in Exhibit 3.1. Provided that both Parties desire to
continue the Development Program after the end of such calendar year, or after
the end of any calendar year thereafter, the Parties shall cooperate in an
effort to submit to the Development Committee, prior to October 1 of the then
current calendar year, a proposed development plan and budget for the following
calendar year. To the extent desired by both Parties, the Development Committee
shall review such proposals as soon
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as possible and shall diligently attempt to approve a mutually acceptable
Development Plan and Budget for the succeeding calendar year, no later than
December 1 of the then current year.
3.2. CONTENTS. Each Development Plan and Budget shall establish, based
upon the competencies and resource availability of each Party: (i) the specific
tasks to be performed by each Party under the Development Program and the times
for completion of such tasks; (ii) the Specifications for each Approved Product,
Cleavase Enzyme, ACLARA Component, and Software, to the extent not previously
approved; (iii) the maximum budget for the Development Program and/or particular
tasks thereunder; (iv) responsibility and funding for establishing facilities;
and (v) such other matters as the Development Committee deems appropriate. The
funding level for the Development Program will be only as established by the
Development Committee.
3.3. PERIODIC REVIEWS. The Development Committee shall review the
Development Plan and Budget on an ongoing basis, no less often than once a
calendar quarter, and may make changes thereto as it deems appropriate.
3.4. DEVELOPMENT PRIORITIES. The Development Committee shall have the
right to include in any Development Plan and Budget activities beyond the scope
of the activities set forth in the initial Development Plan and Budget in
Exhibit 3.1; provided that activities under each Development Plan and Budget
shall extend only to the development of Approved Products expressly set forth
therein. Nothing in this Agreement, including Articles 6 and 7 and the diligence
obligations in Article 7, shall create or imply any obligation of either Party
to include any specific Collaboration Product or Approved Product in the
Development Plan and Budget or to approve any proposed Specification to cause a
Collaboration Product to become an Approved Product.
3.5. EXPANSION OF THE FIELD. Upon request of either Party, the Parties
will discuss expanding the Field to include research applications for [ * ];
provided that neither Party shall be obligated to discuss any expansion to the
extent that it is contractually or otherwise legally prevented from doing so,
and neither Party shall be obligated to agree to any expansion. The terms and
conditions for any such expansion shall be solely as set forth in a written
agreement signed by both Parties.
ARTICLE 4
DEVELOPMENT PROGRAM
4.1. DEVELOPMENT PROGRAM. During the Development Term, each Party shall
use [ * ] efforts to perform the work allocated to such Party in the Development
Plan and Budget within the timeframes set forth therein (such activities,
collectively the "DEVELOPMENT PROGRAM") in order to achieve Commercial Launch of
the applicable Approved Products as soon as reasonably practicable, including
the use of [ * ] efforts to (A) deliver to the other Party reasonable quantities
of proprietary
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materials (e.g. Cleavase Enzymes and ACLARA Components) and such other
deliverables as are set forth in the Development Plan and Budget, (B) allocate
such resources as are required under the Development Plan and Budget, (C)
otherwise reasonably assist the other Party in performing the work for which the
other Party is responsible under the Development Plan and Budget, including
reasonably assisting the other Party in using materials provided to it in order
to perform its work; and (D) use personnel with sufficient skills and
experience, together with sufficient equipment and facilities, to carry out its
obligations under, and to accomplish the objectives of, the Development Plan and
Budget in an expeditious manner. For clarity, the obligations in this Section
4.1 shall not apply to any Collaboration Product that is not an Approved
Product.
4.2. [ * ] INSTRUMENTS. Each Approved Product will be optimized for use
on the particular [ * ] Instrument(s) which are expressly identified in its
Specifications as being recommended for use with the Approved Product. The [ * ]
Instruments set forth in Exhibit 1.7 shall be deemed approved by the Development
Committee and shall be identified in the Specifications for Approved Products as
being so recommended, unless otherwise approved by the Development Committee.
The Parties intend that the Development Committee will select additional
recommended [ * ] Instruments based upon, among other things, the installed base
and ease of use. It is acknowledged and agreed, however, that use of Approved
Products is not intended to be limited to use with recommended [ * ]
Instruments. Rather, except to the extent otherwise agreed by the Parties in
writing, Customers will be free to use Approved Products with any [ * ]
instruments they deem appropriate.
4.3. PROPRIETARY TARGETS.
4.3.1 NOTICE. If a Party or its Affiliate Exclusively Controls
or Non-Exclusively Controls a Target that is to be detected and/or quantified by
an Approved Product, as set forth or contemplated in a proposed development plan
and budget or proposed specification regarding such Approved Product, or if a
Party or its Affiliate otherwise owns a patent application that includes claims
directed to such a Target, such Party shall provide written notice to the other
Party of such control and patent application reasonably in advance of approval
by the Development Committee of each of the Specifications and Development Plan
and Budget for the Approved Product, as applicable. Additionally, throughout the
term of the Agreement, each Party shall notify the other Party in writing of all
Targets of an Approved Product for which it or its Affiliate thereafter obtains
Exclusive Control or Non-Exclusive Control, of all Targets of an Approved
Product for which it or its Affiliate thereafter includes claims in a filed
patent application, and of all changes to the information that it is required to
provide under this Section 4.3, each no later than fifteen (15) days after, as
applicable, the Party or its Affiliate obtains such control, includes such
claims, or such changes occur. Concurrently with such notice, the Party shall
update the information that it is required to provide under Sections 4.3.2 and
4.3.3.
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4.3.2 INFORMATION DISCLOSURE. In each notice under Section
4.3.1, the Party providing the notice shall identify (i) the owner and licensor
of the applicable Patent Rights Covering the Target for which a Party is
claiming Exclusive Control or Non-Exclusive Control, (ii) the patent number,
issue date, and country for all issued patents included in such Patent Rights,
(iii) the patent application number, filing date, and country for all filed
patent applications included in such Patent Rights to the extent that a Target
Fee is being paid to a non-Affiliate third party under a claim in such a patent
application (and not under issued claims in such Patent Rights Covering the same
Target); and (iv) the patent application number, filing date, and country for
all filed patent applications owned by the Party or its Affiliate that include
claims directed to the applicable Target. If the Patent Rights are licensed from
a third party, the Party providing the notice shall include a reasonably
detailed written description of the terms and conditions of the license
agreement under which the license has been obtained which are material to such
Party's obligations to pay Target Fees thereunder. Such written description is
more fully described in Section 4.3.3. Such Party shall also provide to the
other Party, concurrently with the notice, a copy of each patent application
described in (iii) or (iv) above, as filed, as well as a copy of the entire file
history for such patent application, and copies of any further communications to
and from the applicable patent office regarding such pending patent applications
within fifteen (15) days after it, or its licensor if applicable, sends or
receives such communications. For clarity, a Party shall not be required to
provide pending patent applications that it has licensed from a third party, or
the associated information described above, if it is paying Target Fees for the
particular Target under Valid Claims in issued patents and the Target Fees are
not affected by the pending patent applications.
4.3.3 LICENSE AGREEMENT DESCRIPTIONS. Each written description
of a license agreement provided under Section 4.3.2 shall, without limitation,
set forth (i) the term of the agreement and of each license grant to the Party
providing the notice for which a Target Fee is payable thereunder; (ii) the
scope of each such license grant to such Party, including any licensed product,
field, and like definitions, limitations, and restrictions (iii) the scope of
Patent Rights licensed under each such license grant, (iv) the scope of any
exclusivity that has been granted to such Party and the rights reserved to the
licensor, if any, with respect to the Patent Rights; (iv) the scope of such
Party's rights to grant and authorize sublicenses under each such license grant,
(v) the amount of the Target Fees that are payable by such Party with respect to
each such license grant; (vi) the terms and conditions for payment of the Target
Fees by such Party, including "valid claim" definitions, the scope of products
on which a Target Fee is paid, the definition of the basis for the Target Fees
(e.g. definition of net sales), and the timing of and trigger for the payment of
Target Fees; and (vii) any restrictions or limitations in such agreement that
are applicable to sub-licensees under the agreement if the Patent Rights are to
be sub-licensed to the other Party under this Agreement, as more fully described
in Sections 8.4.3(ii) and 8.5.2. The Party receiving such a written description
shall have the right to have an independent auditor inspect the applicable
agreement in accordance with the terms set forth in Section 13.8 in order to
confirm the accuracy of the description. The first such inspection of the
applicable agreement shall not count toward the two inspections per year
contemplated under Section 13.8, provided that the audit is limited to
inspection of the agreement itself for purposes of confirming the accuracy and
completeness of the description.
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4.4. CHANGES. Each Party shall have the right to request changes to
previously approved Specifications, and the Development Plan and Budget, at any
time; provided that changes shall be considered effective and binding upon the
Parties only to the extent approved by the Development Committee. Except for
changes so approved, each Party shall continue to perform its responsibilities
under the Development Program in accordance with the Development Plan and Budget
and Specifications then in effect.
4.5. EXTENSION OF MILESTONE DATES. No Milestone or deliverable shall be
considered completed until approved by the Development Committee. Neither Party
shall be held responsible for a failure to meet a Milestone date set forth in
the Development Plan and Budget, or a failure to meet Specifications under the
Development Program, however, provided that such Party has used, and continues
to use, [ * ] efforts during the Development Term to accomplish the objectives
of the applicable Milestone and Specification. Without limiting the foregoing, a
Party (the "DELAYED PARTY") shall not be held responsible for a failure to meet
a Milestone date to the extent the delay is due to the failure of the other
Party to meet its Milestone dates, provided that the performance of the Delayed
Party is actually dependent on timely performance by the other Party. Under the
circumstances set forth in this Section 4.5 above, the Development Committee
shall meet to discuss extending the Milestone schedule appropriately.
4.6. DEVELOPMENT REPORTS AND RECORDS.
4.6.1 DEVELOPMENT COMMITTEE. Each Party shall keep the
Development Committee fully informed as to the progress and results of those
portions of the Development Program conducted by such Party.
4.6.2 REPORTS. Within the fifteen (15) days after the end of
each calendar quarter, each Party shall prepare and provide to the other Party a
written report that (i) summarizes the progress of the work performed pursuant
to the Development Plan and Budget during the preceding calendar quarter, (ii)
identifies any issues or circumstances of which it is aware that may prevent it
from timely performing the Milestones for which it is responsible under the
Development Program in the then current calendar quarter and the extent of any
potential delay; and (iii) to the extent reasonably practicable, identifies
steps that may be taken, or changes that may be made, to resolve issues and
return to schedule. The form of such reports shall be as mutually agreed by the
Parties prior to December 15, 2001.
4.6.3 RECORDS. Each Party shall use reasonable commercial
efforts to maintain, and to require its subcontractors to maintain, records in
sufficient detail and in good scientific manner as will properly reflect all
work done and results achieved in the performance of the Development Program,
including to maintain reasonably detailed logs of the work performed and time
expended
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by Development Personnel and conception and reduction to practice of
inventions under the Development Program.
4.7. DEVELOPMENT TERM. The term of the Development Program (the
"DEVELOPMENT TERM") shall commence on the Effective Date and shall continue
thereafter until the earlier of: (i) expiration of the then current Development
Plan and Budget without extension in accordance with this Agreement; or (ii)
expiration or termination of this Agreement.
4.8. DEVELOPMENT PROGRAM LICENSES.
4.8.1 TO ACLARA. Subject to the terms and conditions of this
Agreement, TWT hereby grants to ACLARA a non-exclusive, royalty free right and
license under the TWT Technology to perform during the Development Term those
activities assigned to ACLARA under the Development Program in accordance with
the then current Development Plan and Budget to the extent in effect hereunder.
4.8.2 TO TWT. Subject to the terms and conditions of this
Agreement, ACLARA hereby grants to TWT a non-exclusive, royalty free right and
license under the ACLARA Technology to perform during the Development Term those
activities assigned to TWT under the Development Program in accordance with the
then current Development Plan and Budget to the extent in effect hereunder.
4.8.3 RESTRICTIONS. It is understood and agreed that this
Section 4.8 does not grant either Party any right or license (i) to disclose or
use any Technology, or trade secret or know how of the other Party, to or for
any third party; (ii) to manufacture or otherwise reproduce any materials
provided by the other Party; (iii) to sell or otherwise provide any products,
components or services to any third party; or (iv) to perform any other
activities other than those reasonably necessary to perform its responsibilities
in accordance with the Development Plan and Budget. Each Party further agrees
that it will use materials provided by the other Party in connection with the
Development Program solely to perform its responsibilities in accordance with
the Development Plan and Budget. In no event shall any such materials be
transferred or delivered to any other party, unless authorized in the
Development Plan and Budget or otherwise authorized in writing by the Party
providing such materials.
4.9. THIRD PARTY TECHNOLOGY. Except for the use of Technology generally
available for purchase from a third party and the use of Technology for which
the other Party's prior written consent has been obtained, neither Party shall
use the Technology of any third party in connection with the Development Program
if such use would result in the need for the other Party to obtain an additional
license or other authorization from such third party in order to exercise its
rights and licenses as contemplated herein. Additionally, a Party shall not
disclose any trade secrets of a third party, or copyright protected materials of
a third party, to the other Party without the prior written consent of the other
Party. The Parties will cooperate reasonably to redirect the Development Program
if the Parties are concerned that an Approved Product may infringe the Patent
Rights of any third party.
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4.10. AGREEMENTS WITH EMPLOYEES AND SUBCONTRACTORS. Neither Party shall
use a subcontractor to perform its responsibilities under the Development
Program except to the extent expressly approved by the Development Committee.
Each Party shall enter into a written agreement with each employee, and each
such subcontractor, that it uses to perform its responsibilities under the
Development Program which assigns to such Party, to the extent permitted by
applicable law, all right, title, and interest, in and to all Technology
invented, created, or otherwise developed by the subcontractor or employee, or
the subcontractor's employees, in the performance of such activities, and all
Intellectual Property Rights in or to such Technology.
4.11. VISITING PERSONNEL. It is understood that in the course of the
Development Program there may be occasions where one Party's personnel
("VISITING PERSONNEL") may be stationed at the other Party's facilities on a
temporary basis. Such Visiting Personnel shall agree to be bound by all
reasonable orders, rules and regulations pertaining to the hosting Party's
facilities while at such facilities, including reasonable confidentiality
obligations.
4.12. EQUIPMENT OWNERSHIP. Except as otherwise agreed upon by the
Parties in writing, each Party shall solely own all equipment that it purchases.
ARTICLE 5
FUNDING OF DEVELOPMENT PROGRAM
5.1. FUNDING. Subject to the limitations set forth below, each party
shall be responsible for fifty percent (50%) of the total Development Costs
incurred by TWT and ACLARA in accordance with the Development Plan and Budget,
as described more fully in this Article 5 below. Except for payment of
Development Costs by a Party to the other Party in accordance with Sections 5.4
and 5.6, no other amounts shall be reimbursed to such other Party for activities
arising out of, in conducting, or otherwise related to the Development Program,
including (i) salary, employee benefits, materials, support and administrative
staff, overhead, and other associated costs and expenses; (ii) amounts payable
to third parties, such as contractors or the like; and (iii) other direct and
indirect costs and expenses incurred by or on behalf of such Party in
conducting, in connection with, or otherwise arising out of, any activity
pursuant to the Development Plan and Budget.
5.2. DEVELOPMENT RATE. Except for Development Costs identified in
Section 5.3, an FTE rate for Development Personnel, established in accordance
with this Section 5.2, ("DEVELOPMENT RATE") shall be used for purposes of
determining all Development Costs incurred by each Party with respect to the
Development Program. The Development Rate shall be [ * ] per FTE. Except for
adjustments in accordance with the following, there shall be no change to the
Development Rate except as mutually agreed upon by the Parties in writing. It is
understood and agreed that the Development Rate shall be adjusted on January 1,
[ * ], and at the beginning of each calendar year thereafter,
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based upon the percentage increase or decrease in salaries for similar
development personnel as established in the Radford Associates Annual
Biotechnology Compensation and Benefits Survey (average for the entire U.S.)
over the applicable period. For example, on January 1, 2003, the Development
Rate shall be adjusted by the percentage increase or decrease in such salaries
shown by such survey to have occurred between the Effective Date and January 1,
2003.
5.3. OTHER APPROVED DEVELOPMENT COSTS. While the Parties intend that
each Party's Development Costs will be calculated using the Development
Personnel hours and the Development Rate, it is acknowledged and agreed that the
Development Plan and Budget may identify from time to time costs and expenses
that are to be incurred by a Party in the performance of its responsibilities
under the Development Program which are in addition to the Development Costs
calculated in such manner. Under such circumstances, the total Development Costs
of such Party shall be the sum of (i) such additional costs and expenses and
(ii) the Development Costs of such Party that have been calculated using the
Development Rate and Development Personnel hours. Only Development Costs
expressly identified in the Development Plan and Budget as costs which are not
reimbursed through Development Personnel hours shall be so added to the
applicable Party's Development Costs.
5.4. PAYMENT. So that the Parties will share equally in the Development
Costs incurred in accordance with the Development Plan and Budget, balancing
payments shall be made in accordance with this Section 5.4. On or before the
first day of each calendar quarter, the Party who is budgeted to use the lower
amount of Development Costs during such quarter (as reflected in the
then-current Development Plan and Budget) (the "REIMBURSING PARTY") shall pay to
the other Party (the "REIMBURSED PARTY") an amount equal to (i) fifty percent
(50%) of the Development Costs budgeted to be incurred by the Reimbursed Party
during such quarter, less (ii) fifty percent (50%) of the Development Costs
budgeted to be incurred by the Reimbursing Party during such quarter, all in
accordance with the Development Plan and Budget then in effect. Unless otherwise
specified in the applicable Development Plan and Budget, Development Costs
budgeted for a full calendar year will be deemed budgeted in equal amounts for
each calendar quarter during such year. If the Development Costs actually
incurred by a Party in a calendar quarter are less than the Development Costs
budgeted for such Party for such calendar quarter under the Development Plan and
Budget, then the difference will be carried forward and credited against
Development Costs to be incurred by such Party in succeeding calendar quarter(s)
during the same calendar year; and, subject to Section 5.5 below, if a Party
actually incurs in a calendar quarter Development Costs in excess of the amounts
budgeted for such Party for such calendar quarter, then the excess may be
carried forward and treated as a Development Cost incurred by such Party in a
subsequent calendar quarter during the same calendar year as designated by such
Party.
5.5. EXCESS COSTS. To the extent the Development Costs incurred by a
Party exceed by more than [ * ] percent ([ * ]%) the Development Costs budgeted
for such Party for a calendar quarter in the Development Plan and Budget then in
effect, then such Party shall not be entitled to carry
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forward any portion of such excess Development Costs unless the other Party
approves such excess Development Costs, which approval shall not be unreasonably
withheld to the extent that incurring such excess Development Costs was not
within the reasonable control of the Party incurring such hours. Likewise,
unless otherwise mutually agreed by the Parties, neither Party shall be
obligated to incur Development Costs in excess of the amounts set forth for such
Party in the then-current Development Plan and Budget.
5.6. RECONCILIATION. Within thirty (30) days following the end of each
calendar year, each Party shall provide to the other a written summary of the
Development Costs actually incurred by such Party during each calendar quarter
of such calendar year, in a form mutually agreed by the Parties (such form to be
agreed and established by the Parties on or before December 15, 2001). The
Parties shall reconcile, in accordance with Section 13.1, the total Development
Costs actually incurred by both Parties, and reimbursements previously provided
under Section 5.4, for such calendar year in order to determine the amount of
the payment, if any, to be made by one Party to the other so that each Party
bears fifty percent (50%) of the total Development Costs actually incurred by
both Parties in such calendar year. A balancing payment shall be payable by one
Party to the other Party under this Section 5.6 in an amount determined so that
each Party bears fifty percent (50%) of such total Development Costs.
Development Costs incurred by a Party in excess of the limits described in
Section 5.5 shall not be treated as Development Costs for purposes of such
reconciliation unless approved by the other Party.
ARTICLE 6
JOINT STEERING COMMITTEE AND COMMERCIALIZATION PLAN AND BUDGET
6.1. GENERAL. It is understood and agreed that Approved Products shall
be marketed and distributed by the Parties solely as set forth in Articles 6 and
7.
6.2. COMMERCIALIZATION TEAM LEADER.
6.2.1 APPOINTMENT. Each Party shall appoint a
commercialization team leader that is reasonably acceptable to the other Party
("COMMERCIALIZATION TEAM LEADER") who shall serve as the primary point of
communication and coordination between the Parties with respect to activities
under the Commercialization Plan and Budget (the "COMMERCIALIZATION PROGRAM")
and shall be responsible for day to day coordination of such activities
internally at the appointing Party. Subject to the foregoing, each Party shall
have the right to replace its Commercialization Team Leader from time to time by
providing prior written notice to the other Party. The initial Commercialization
Team Leaders for the Parties shall be as follows:
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TWT: ACLARA:
Name: [ * ] Name: [ * ]
Title: Senior Director of Title: Director of Corporate
Business Development Development
Voice: [ * ] Voice: [ * ]
Fax: [ * ] Fax: [ * ]
6.2.2 RESPONSIBILITIES. During the term of the Agreement, the
Commercialization Team Leaders shall meet to discuss the progress of the
Commercialization Program and other activities as the Joint Steering Committee
may approve at least bi-weekly by phone or video conference, and in person at
least once every calendar month (with the location alternating between the
facilities of ACLARA and TWT unless otherwise agreed). The Commercialization
Team Leader for each Party shall act as the chairperson of the Joint Steering
Committee for such Party and shall keep the Joint Steering Committee reasonably
informed regarding such Party's progress under the Commercialization Program.
Additionally, each Project Leader shall be responsible for (i) monitoring the
schedules and progress of the Commercialization Program against the
Commercialization Plan and Budget; (ii) discussing remedial measures if the
Commercialization Team Leaders determine that the progress with respect to a
particular Sales Goal or a particular task under the Commercialization Plan and
Budget is unsatisfactory; (iii) receiving and submitting requests for
information, materials and/or assistance between the Parties, including
coordinating sales calls and information sharing; (iv) preparing and providing
quarterly written reports to the other Party in accordance with Section
6.7.5(ii); (v) coordinating the preparation and providing each proposed
Commercialization Plan and Budget to the other Joint Steering Committee members
by October 1 of each calendar year; (vi) overseeing and coordinating orders of
ACLARA Components and Approved Products, including the forecasts therefor; and
(vii) performing such other activities as approved by the Joint Steering
Committee. Approximately [ * ] hours of each Commercialization Team Leader's
time during each calendar month hereunder shall be dedicated to such activities
to the extent necessary to perform the activities; it being understood that each
Commercialization Team Leader shall devote greater time to such activities
during the plan and budget establishment process as is reasonably necessary in
order to coordinate and prepare a draft Commercialization Plan and Budget to the
Joint Steering Committee. Such time commitment of the Commercialization Team
Leaders may be adjusted by written agreement of the Parties from time to time.
6.3. [Intentionally Omitted]
6.4. JOINT STEERING COMMITTEE. ACLARA and TWT will establish, promptly
following the Effective Date, a team of appropriate personnel from both TWT and
ACLARA to oversee, review
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and coordinate the commercialization of all Approved Products and to oversee the
Development Committee (the "JOINT STEERING COMMITTEE").
6.4.1 MEMBERSHIP. The Joint Steering Committee shall consist
of six members, three appointed by ACLARA and three appointed by TWT. Each
member shall have reasonable expertise in product marketing and distribution,
and at least one member appointed by each Party shall be an executive of such
Party at the vice president level or higher. Subject to the foregoing provisions
of this Section 6.4.1, each of TWT and ACLARA may replace its Joint Steering
Committee members at any time by providing prior written notice of the change to
the other Party. The Joint Steering Committee may appoint sub-committees and
project teams to, among other things, oversee, review, and coordinate
commercialization of particular Approved Products, approach particular Customers
under the Early Access Program, negotiate with such Customers the terms and
conditions for early access, and support the particular units of Approved
Product provided to such Customers prior to Commercial Launch. The Joint
Steering Committee shall appoint a Finance Sub-Committee as more fully described
in Section 6.5.
6.4.2 MEETINGS. After its formation in accordance with Section
6.4.1 above, the Joint Steering Committee shall meet at least once each calendar
month, unless otherwise agreed by the Parties, at such locations as the Parties
agree. If a location is not selected by the Parties, the location of such
meetings shall alternate between ACLARA's notice address and TWT's notice
address under Section 20.6. At its meetings, the Joint Steering Committee will
be responsible for establishing and implementing, as applicable: (i) a
co-branding strategy, including approving Joint Marks and approving product
labeling and marketing materials that the Joint Steering Committee desires to
have used; (ii) an early access program and strategy for applicable Approved
Products; (iii) co-marketing activities; (iv) the selection of one or more Joint
Distributors based upon mutually agreed criteria; and (v) such other matters as
provided for in this Agreement or as may be mutually established in writing by
the Parties hereto. The Joint Steering Committee shall also be responsible for
(A) overseeing activities of the Finance Sub-Committee and the Intellectual
Property Sub-Committee; (B) overseeing the Development Committee, including
providing information to the Development Committee regarding product strategy,
planning, and direction, requesting evaluation of feasibility or other
investigation of potential Collaboration Products, and providing market feedback
and evaluation with regard to potential Collaboration Products; and (C)
reviewing and approving press releases and other announcements relating to the
subject matter of this Agreement. Other representatives of TWT and ACLARA may
attend Joint Steering Committee meetings as non-voting observers only with the
approval of the Joint Steering Committee. Each Party shall bear the costs and
expenses of its personnel participating in Joint Steering Committee meetings,
including travel expenses.
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6.4.3 DECISION MAKING. Decisions and approvals of the Joint
Steering Committee shall be made only by majority approval of all members,
either present or voting by proxy, with each member having one vote. The Joint
Steering Committee shall prepare a written record of all Joint Steering
Committee decisions which are to be binding upon the Parties, including
approvals of Joint Distributors, co-branding strategies, and Joint Marks, which
records shall not be binding upon either Party until signed by both Parties.
Except for such signed records, all decisions and approvals of the Joint
Steering Committee, and discussions at Joint Steering Committee meetings,
including by any sub-committees and project teams, shall be for advisory and
information purposes only and shall not be binding upon either Party. Unless
otherwise specified, "approved" by the Joint Steering Committee as used in this
Agreement means binding approval in accordance with this Section 6.4.3.
6.5. FINANCE SUB-COMMITTEE. The Parties shall also establish, promptly
following the Effective Date, a Finance Sub-Committee to advise the Joint
Steering Committee with regard to each Commercialization Plan and Budget and
other financial matters, including financial, accounting, budgeting, reporting,
and other issues that may arise in connection with the Commercialization Plan
and Budget, or activities thereunder. The Finance Sub-Committee shall consist of
at least two (2) members (or such other number as the Joint Steering Committee
may deem appropriate), with an equal number of members being appointed by each
of ACLARA and by TWT. Each member shall have reasonable expertise in the areas
of accounting, cost allocation, budgeting, and financial reporting. Subject to
the foregoing provisions of this Section 6.5, each of TWT and ACLARA may replace
its Finance Sub-Committee members at any time by providing prior written notice
of the change to the other Party. The Finance Sub-Committee shall meet
reasonably promptly upon request by the Joint Steering Committee and shall
provide, in accordance with GAAP, the review and feedback requested by the Joint
Steering Committee. Decisions and reports of the Finance Sub-Committee shall be
for advisory purposes only unless approved by the Joint Steering Committee.
6.6. COMMERCIALIZATION PLAN AND BUDGET.
6.6.1 GENERAL. The Parties (through the Joint Steering
Committee) shall promptly develop and agree on a Commercialization Plan and
Budget for the period through December 31, 2002 and such Commercialization Plan
and Budget shall include funding of at least [ * ] Dollars ($[ * ]) of
Commercialization Costs. The Parties shall cooperate in an effort to submit to
the Joint Steering Committee, by October 1 of the calendar year ending at such
time, and of each calendar year of the term thereafter, a proposed
commercialization plan and budget for the immediately following calendar year,
provided that the term of the Agreement extends into such immediately following
calendar year. The Joint Steering Committee shall review such proposals as soon
as possible, including obtaining review by the Finance Sub-Committee, and shall
diligently attempt to approve a mutually acceptable Commercialization Plan and
Budget for such succeeding calendar year, no later than November 1 of the then
current year. If, by November 1 of the then current year, the Joint Steering
Committee has not approved a Commercialization Plan and Budget for the
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immediately following calendar year, either Party may, by written notice to the
other, have the matter referred for attempted resolution in accordance with
Article 18. Pending resolution of such matter, the Parties will proceed in
accordance with those aspects of the Commercialization Plan and Budget that have
been approved by the Joint Steering Committee and will proceed with respect to
the unresolved matters for up to one additional calendar quarter in accordance
with the last calendar quarter of the preceding Commercialization Plan and
Budget but only to the extent that the activities in such last calendar quarter
continue to be reasonably applicable.
6.6.2 CONTENTS. Unless otherwise approved by the Joint
Steering Committee, each proposed commercialization plan and budget shall be
prepared in accordance with the conditions and principles set forth in Exhibit
6.6.2 and the other requirements approved by the Joint Steering Committee for
the Commercialization Plan and Budget. Each Commercialization Plan and Budget
shall, if applicable and desired: (i) establish specific tasks, if any, to be
performed by each Party with respect to the promotion, marketing, and support of
the Approved Products, including specific marketing activities and meetings,
exhibitions, trade shows, seminars, and advertisements for the Approved
Products, the responsibilities of each Party with respect to such tasks and
activities, and the times for completion thereof; (ii) establish budgets for
tasks and activities thereunder; (iii) set forth Sales Goals for particular
geographic regions and Approved Products; and (iv) establish appropriate Early
Access Programs including identifying any particular early access Customers and
restrictions on distribution of Approved Products that have been approved by the
Development Committee for Commercial Launch. The Commercialization Plan and
Budget may be changed only by approval of the Joint Steering Committee.
6.6.3 PERIODIC REVIEWS. The Joint Steering Committee shall
review the Commercialization Plan and Budget on an ongoing basis, no less often
than quarterly, and may make changes thereto as it deems appropriate.
6.6.4 EARLY ACCESS PROGRAM. As the Joint Steering Committee
may designate from time to time, the Parties will seek to enter into
arrangements with high profile, third party Customers approved by the Joint
Steering Committee to provide such Customers with preferential access to
particular Approved Products, and will seek to perform advance marketing
activities for such Approved Products, each prior to making the Approved
Products available to Customers generally (such activities with respect to all
applicable Approved Products, collectively the "EARLY ACCESS Program"). The
Joint Steering Committee will establish an Early Access Program by including
activities therefor in the Commercialization Plan and Budget, identifying in the
Commercialization Plan and Budget any particular early access Customers and the
activities and responsibilities of each Party with respect thereto.
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6.7. FUNDING OF COMMERCIALIZATION ACTIVITIES.
6.7.1 GENERAL. Subject to the limitations in this Section 6.7,
each Party shall be responsible for fifty percent (50%) of the total
Commercialization Costs incurred by TWT and ACLARA reasonably arising out of, in
conducting, or otherwise in connection with the activities for which the
applicable Party is responsible as set forth in the Commercialization Plan and
Budget or this Agreement. Except for payment of Commercialization Costs by a
Party to the other Party in accordance with Sections 6.7.2 and 6.7.4, no other
amounts shall be reimbursed to such other Party for activities related to
marketing, distribution, sale or support of Approved Products and Software
hereunder.
6.7.2 PAYMENT. So that the Parties will share equally in the
Commercialization Costs incurred in accordance with the Commercialization Plan
and Budget, balancing payments shall be made in accordance with this Section
6.7.2. On or before the first day of each calendar quarter for which activities
are scheduled under the Commercialization Plan and Budget, the Party who is
budgeted to expend the lower amount of Commercialization Costs during such
quarter (as reflected in the then-current Commercialization Plan and Budget)
(the "REIMBURSING PARTY") shall pay to the other Party (the "REIMBURSED PARTY")
an amount equal to (i) fifty percent (50%) of the Commercialization Costs
budgeted to be incurred by the Reimbursed Party during such quarter for
activities in accordance with the Commercialization Plan and Budget, less (ii)
fifty percent (50%) of the Commercialization Costs budgeted to be incurred by
the Reimbursing Party during such quarter for activities in accordance with the
Commercialization Plan and Budget. Unless otherwise specified in the applicable
Commercialization Plan and Budget, Commercialization Costs budgeted for a full
calendar year will be deemed budgeted in equal amounts for each calendar quarter
during such year. If the Commercialization Costs actually incurred by a Party in
a calendar quarter for a particular activity are less than the Commercialization
Costs budgeted to be incurred by such Party for such activity in such calendar
quarter under the Commercialization Plan and Budget, then the difference will be
carried forward and credited against Commercialization Costs to be incurred by
such Party for such activity in succeeding calendar quarter(s) during the same
calendar year, but only if such Party is responsible under the Commercialization
Plan and Budget for performing the same activity in the succeeding calendar
quarter; and, subject to Section 6.7.3 below, if a Party actually incurs in a
calendar quarter Commercialization Costs for a particular activity in excess of
the amounts budgeted to be incurred by such Party for such activity in such
calendar quarter, then the excess may be carried forward and treated as a
Commercialization Cost incurred by such Party for such activity in a subsequent
calendar quarter in the same calendar year as designated by such Party, but only
if such Party is responsible under the Commercialization Plan and Budget for
performing the activity in the succeeding calendar quarter.
6.7.3 EXCESS COSTS. To the extent the Commercialization Costs
incurred by a Party for a particular activity exceed by more than [ * ] percent
([ * ]%) the Commercialization Costs budgeted to be incurred by such Party for
such activity in a calendar quarter in the Commercialization Plan and Budget
then in effect, then such Party shall not be entitled to carry
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forward in accordance with Section 6.7.2 any portion of such excess
Commercialization Costs for such activity unless the other Party approves such
excess Commercialization Costs for the particular activity, which approval shall
not be unreasonably withheld to the extent that incurring such excess
Commercialization Costs for the particular activity was not within the
reasonable control of the Party incurring such Commercialization Costs.
Likewise, unless otherwise mutually agreed by the Parties, neither Party shall
be obligated to incur Commercialization Costs to perform its responsibilities
under the Commercialization Plan and Budget which are in excess of the amounts
set forth for such Party in the then-current Commercialization Plan and Budget.
6.7.4 RECONCILIATION. Within thirty (30) days following the
end of each calendar year, each Party shall provide to the other a written
summary of the Commercialization Costs actually incurred by such Party during
each calendar quarter of such calendar year, in a form mutually agreed by the
Parties (such form to be agreed and established by the Parties on or before
December 15, 2001). The Parties shall reconcile, in accordance with Section
13.1, the total Commercialization Costs actually incurred by both Parties, and
reimbursements previously provided under Section 6.7.2, for such calendar year
in order to determine the amount of the payment, if any, to be made by one Party
to the other so that each Party bears fifty percent (50%) of the total
Commercialization Costs actually incurred by both Parties in such calendar year.
A balancing payment shall be payable by one Party to the other Party under this
Section 6.7.4 in an amount determined so that each Party bears fifty percent
(50%) of such total Commercialization Costs. Excess Commercialization Costs
incurred by a Party, as set forth in Section 6.7.3, shall not be treated as
Commercialization Costs for purposes of such reconciliation unless approved by
the other Party in accordance with Section 6.7.3.
6.7.5 COMMERCIALIZATION REPORTS AND RECORDS.
(i) JOINT STEERING COMMITTEE. Each Party shall keep
the Joint Steering Committee fully informed of its progress and activities for
which it is responsible under the Commercialization Plan and Budget.
(ii) REPORTS. Within the fifteen (15) days after the
end of each calendar quarter, each Party shall prepare and provide to the other
Party a written report that summarizes the progress of the activities performed
by such Party pursuant to the Commercialization Plan and Budget during the
preceding calendar quarter, identifies any issues or circumstances of which it
is aware that may adversely affect the activities under the Commercialization
Plan and Budget in the then current calendar quarter; and, to the extent
reasonably practicable, identifies steps that may be taken, or changes that may
be made, to resolve issues. The form of such reports shall be mutually agreed
upon by the Parties on or before December 15, 2001.
(iii) RECORDS. Each Party shall use reasonable
commercial efforts to maintain records in sufficient detail as will properly
reflect all work done, and Commercialization
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Costs expended, in the performance of activities arising out of, in conducting,
or otherwise in connection with the Commercialization Plan and Budget.
6.8. JOINT PRODUCT FORECASTS AND ORDERS. In the same manner as set
forth in Section 12.3 in connection with the supply of Approved Products to
ACLARA, the Joint Steering Committee shall establish Forecasts for supply of
each Approved Product by TWT to Customers and to Marketing Distributors (the
"JOINT PRODUCT FORECASTS"). It being understood that unless otherwise agreed by
the Joint Steering Committee, the Joint Product Forecasts shall include
quantities of Approved Products independently forecasted by Marketing
Distributors and quantities ordered by Customers consistent with the forecasting
requirements set forth in Sections 12.3 and 12.4. Such Joint Product Forecasts
shall be used for purposes of determining whether or not ACLARA will have the
right to manufacture Approved Products under the Backup Manufacturing License as
set forth in Section 12.11. The Joint Steering Committee shall issue firm orders
for the supply of such Approved Products in the same manner as set forth in
Section 12.4.1 for purposes of determining the quantities of Approved Products
that TWT is obligated to supply.
ARTICLE 7
COMMERCIALIZATION
7.1. GENERAL RESPONSIBILITIES. Each Party shall use [ * ] efforts to
perform the activities allocated to such Party in the Commercialization Plan and
Budget in accordance with the schedules set forth therein, including the use of
[ * ] efforts to (A) allocate such resources as are required under the
Commercialization Plan and Budget, (B) cooperate with the other Party to perform
activities under the Commercialization Plan and Budget, including to support
each Customer under the Early Access Program in an effort to ensure that the
applicable early access units of Approved Product are successfully promoted to
and used by such Customers; (C) provide reasonable support of Approved Products
that have otherwise been distributed by such Party directly to Customers and
reasonable backup support to the Marketing Distributors, in each case to the
extent required by the Commercialization Plan and Budget; and (D) use personnel
with reasonably sufficient marketing and other skills and experience to carry
out its responsibilities under, and to accomplish the objectives of, the
Commercialization Plan and Budget in an expeditious manner. Neither Party shall
be held responsible for a failure to perform an activity pursuant to the
Commercialization Plan and Budget, and no such failure shall be considered a
breach of this Agreement, provided that such Party used [ * ] efforts to perform
the applicable activity in accordance with the Commercialization Plan and
Budget. Notwithstanding anything to the contrary, neither Party shall be
required to perform any activities other than as required by the
Commercialization Plan and Budget in order to market or promote the Approved
Products. The Parties will share equally in all costs and expenses associated
with the marketing, promotion, distribution, sale, and support of Approved
Products as more fully set forth in Article 6 above.
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7.2. SALES GOALS. It is acknowledged and agreed that the
Commercialization Plan and Budget may establish from time to time Sales Goals
for Approved Products, each of which may be established on an Approved Product
by Approved Product, and geographic region by geographic region, basis. A Party
shall not be responsible for any failure to meet such Sales Goals, provided that
such failure is not primarily caused by a failure of the Party to use [ * ]
efforts to perform its responsibilities under the Commercialization Plan and
Budget.
7.3. COMMERCIAL LAUNCH. The Parties shall use [ * ] efforts to achieve
Commercial Launch of each Approved Product as soon as reasonably practicable
after approved by the Development Committee for Commercial Launch.
7.4. MARKETING AND DISTRIBUTION BY TWT. Unless otherwise approved by
the Joint Steering Committee, TWT shall have [ * ]. Accordingly, it is
acknowledged and agreed that TWT shall have the right to exercise its rights
under this Article 7 with respect to Approved Products that have been approved
by the Development Committee for Commercial Launch.
7.4.1 GENERAL LICENSE GRANT. Subject to the terms and
conditions of this Agreement, ACLARA hereby grants to TWT a worldwide,
non-exclusive, right and license under the ACLARA Technology to promote, market,
sell, offer to sell, import, and otherwise distribute to Customers for use in
the Field in all countries and geographic regions the Approved Products
manufactured by TWT in accordance with this Agreement; provided that [ * ].
Subject to Sections 7.6.1 and 7.6.2, this license grant includes the right to
exercise such rights both directly and indirectly through Affiliates and
Marketing Distributors.
7.4.2 SOFTWARE LICENSES. It is acknowledged and agreed that
the Development Committee may approve the use of particular Software with an
Approved Product in the Field. Subject to the terms and conditions of this
Agreement, ACLARA hereby grants to TWT a worldwide, non-exclusive, right and
license, under the Intellectual Property Rights owned or Licensable by ACLARA
that are applicable to such Software, to distribute, transmit, and grant
licenses to Customers to use on commercially reasonable terms, such Software in
all countries and geographic regions, and machine readable updates,
improvements, and other modifications to such Software provided by TWT, each for
use in the Field with the applicable Approved Product. If the Software includes
Software provided by ACLARA, then TWT agrees to notify ACLARA of any
unauthorized use of the ACLARA Software of which TWT becomes aware.
7.4.3 ACLARA COMPONENTS. Notwithstanding anything to the
contrary, TWT shall not be responsible for any failure to meet any diligence
obligation of TWT under this Article 7 if the failure resulted from a failure to
supply an ACLARA Component used in the Approved Product, as such failure is more
fully defined in Section 11.11.1 or resulted from a quality issue with an
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ACLARA Component. It is acknowledged and agreed that all ACLARA Components used
in Approved Products distributed hereunder will be [ * ].
7.5. MARKETING AND DISTRIBUTION BY ACLARA. It is acknowledged and
agreed that ACLARA shall have the right to market and promote, in accordance
with the Commercialization Plan and Budget, Approved Products for use in the
Field, [ * ]
7.5.1 [ * ]
7.5.2 [ * ]
7.5.3 SUPPLY OF APPROVED PRODUCTS. [ * ]
7.6. INDIRECT DISTRIBUTION
7.6.1 AFFILIATES. TWT shall have the right to exercise its
rights pursuant to Section 7.4, and ACLARA shall have the right to exercise any
rights that it is granted pursuant to Section 7.5, each through its Affiliates,
provided that all actions and inaction of each Affiliate of a Party in
connection with the marketing, promotion, sale, distribution, or importation of
an Approved Product shall be deemed to be actions and inaction of such Party. In
particular, any action or inaction by such an Affiliate in connection with such
activities which would have been a breach of this Agreement if by the Party
itself shall be considered a breach of this Agreement by such Party in the same
manner as if performed by such Party.
7.6.2 MARKETING DISTRIBUTORS. Except with respect to Joint
Distributors approved by the Joint Steering Committee and ACLARA Partners
requested by ACLARA, each as set forth in this Section 7.6 below, neither Party
shall sell or otherwise distribute Approved Products using a Marketing
Distributor unless [ * ].
7.6.3 JOINT DISTRIBUTORS. The Parties (through the Joint
Steering Committee or its appointees) intend to evaluate the possibility and
need for using a Joint Distributor for commercialization of Approved Products
under this Agreement for particular regions and Approved Products. If the Joint
Steering Committee decides that it wishes to pursue an arrangement with one or
more Joint Distributors, the Joint Steering Committee may appoint a separate
committee of appropriate individuals to approach the potential Joint
Distributor(s) that it has selected and to negotiate the terms and conditions
for a distribution arrangement with each such entity for review and approval by
the Joint Steering Committee. The terms and conditions for distribution through
a Joint Distributor shall be solely as approved by the Joint Steering Committee.
Once a Joint Distributor has been appointed in accordance herewith, the same
shall be treated as a Marketing Distributor of the Party with which it enters
into a written agreement, as approved by the Joint Steering Committee, for
purposes of calculating Net Sales.
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7.6.4 ACLARA PARTNERS.
(i) REQUEST AND CONSIDERATION. [ * ]
(ii) AGREEMENT WITH TWT. [ * ]
(iii) SCOPE OF APPOINTMENT. [ * ]
7.7. NO OTHER DISTRIBUTION RIGHTS. [ * ].
7.8. PRODUCT CONFIGURATIONS. Unless otherwise expressly agreed upon by
the Parties in writing, Approved Products are licensed for distribution under
this Article 7 solely in the configurations expressly approved by the
Development Committee in the Specifications for the Approved Product. The
distribution of any component or sub-configuration of an Approved Product shall
be considered unlicensed. [ * ]
7.9. MARKETING MATERIALS AND PRESENTATIONS. All presentations and
demonstrations of Approved Product(s) shall be subject to any requirements
approved by the Joint Steering Committee or otherwise set forth in the
Commercialization Plan and Budget. Additionally, subject to Article 9 and
requirements approved by the Joint Steering Committee as between the Parties,
TWT shall be [ * ].
7.10. CUSTOMER AGREEMENTS. Notwithstanding anything to the contrary,
including Section 6.4.3 and the Commercialization Plan and Budget, to the extent
that a Customer desires to enter into a written agreement for the supply of
Approved Product(s), the Party having responsibility for distribution of
Approved Products to such Customer (the "RESPONSIBLE PARTY") shall control the
negotiations of such agreements, and the terms and conditions therein, provided
that the other Party shall not be obligated to perform obligations under such
agreement, except to the extent set forth in this Agreement or otherwise agreed
upon by such other Party in writing. The Responsible Party shall not, however,
commit to supply Approved Products to the Customer in a manner that is
inconsistent with its right to obtain Approved Products in accordance with this
Agreement. [ * ] This Section 7.10 is not intended to prevent the Party that is
not the Responsible Party (the "NON-RESPONSIBLE PARTY"), however, from otherwise
promoting the Approved Products to Customers, or working with Customers to
understand the terms and conditions for supply desired by the Customer, and
soliciting from Customers purchase orders for Approved Products that have been
approved by the Development Committee for Commercial Launch in order to provide
the purchase orders to the Responsible Party, each in accordance with this
Agreement to the extent authorized in the Commercialization Plan and Budget;
provided that the Non-Responsible Party shall have no authority, express or
implied, to bind the Responsible Party, accept purchase orders, or to make
commitments or incur obligations of any kind on behalf of the Responsible Party
and shall inform the Customer of such limitations in advance. To the extent that
the Non-Responsible Party provides
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to the Responsible Party a purchase order issued by a Customer, within ten (10)
days after such issuance, for the purchase by such Customer of Approved Products
that have been approved by the Development Committee for Commercial Launch, and
provided that marketing to the particular Customer is within the scope of the
Non-Responsible Party's marketing responsibilities under the Commercialization
Plan and Budget, then the Responsible Party agrees to use its [ * ] efforts to
supply to such Customer the quantity of Approved Products ordered in such
purchase order on the Responsible Party's then standard terms and conditions for
supply of the applicable Approved Products, which terms and conditions will be
substantially similar to the non-financial terms and