STRATEGIC ALLIANCE AGREEMENT

 

Table of Contents

 

1.	DEFINITIONS
2.	GENERAL
3.	RIGHTS OF EXCLUSIVITY
4.	PRESENTATION AND REVIEW OF PLANS; ELECTIONS BY QUEST DIAGNOSTICS
5.	DEVELOPMENT OF LICENSED LABORATORY TESTS
6.	COMMERCIALIZATION OF LICENSED LABORATORY TESTS AND TEST KIT SERVICES
7.	DEVELOPMENT OF TEST KITS
8.	COMMERCIALIZATION OF LICENSED LABORATORY TEST COMPONENTS AND TEST KITS
9.	PROVISION OF INSTRUMENTS, PROPRIETARY SUPPLIES AND TEST KITS
10.	RECORDS
11.	CONFIDENTIALITY
12.	PROPRIETARY RIGHTS AND LICENSES
13.	WARRANTIES
14.	INDEMNIFICATION AND LIMITATION OF LIABILITY
15.	TERM AND TERMINATION
16.	MISCELLANEOUS PROVISIONS
TABLE OF SCHEDULES
SCHEDULE A		DEFINITIONS
SCHEDULE B		STRATEGY AND BUDGET
SCHEDULE C		REQUIRED CONTENTS FOR EACH PLAN
SCHEDULE D		REQUIRED CONTENTS FOR THE PLAN SUPPLEMENT
SCHEDULE E		ROYALTIES AND FEES TO CIPHERGEN
SCHEDULE F		ROYALTIES TO QUEST DIAGNOSTICS
SCHEDULE G		LIST OF CIPHERGEN PATENTS
SCHEDULE H		LIST OF CIPHERGEN COLLABORATION AGREEMENTS
SCHEDULE I		LIST OF QUEST DIAGNOSTICS PATENTS
SCHEDULE J		QUEST NETWORK MEMBERS
SCHEDULE K		PROTEINCHIP PRODUCTS

 

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STRATEGIC ALLIANCE AGREEMENT

 

THIS STRATEGIC ALLIANCE AGREEMENT (“ Agreement ”) is made as of July 22, 2005 (the “ Effective Date ”) between QUEST DIAGNOSTICS INCORPORATED a Delaware corporation with offices at 1290 Wall Street West, Lyndhurst, New Jersey 07071 (“ Quest Diagnostics ”), and CIPHERGEN BIOSYSTEMS, INC. , a Delaware corporation with offices at 6611 Dumbarton Circle, Fremont, California 94555 (“ Ciphergen ”).  Each of Quest Diagnostics and Ciphergen may be referred to herein as a “ Party ” and together as the “ Parties .”

 

RECITALS:

 

A.                                    Quest Diagnostics is a leading provider of diagnostic testing, information and services and has substantial experience in the development and commercialization of products having Clinical Diagnostic Applications (as such terms are defined below).

 

B.                                      Ciphergen develops, manufactures and markets its ProteinChip Systems using its patented surface enhanced laser desorption/ionization (“ SELDI ”) technology and also owns and operates a division directed toward the development and commercialization of products for the field of Clinical Diagnostics, including the discovery (principally through Ciphergen Collaboration Agreements) of disease-specific Biomarkers and protein signatures that could be utilized in Licensed Laboratory Tests and Test Kits (as such terms are defined below).

 

C.                                      The Parties desire to collaborate in a strategic alliance to develop and commercialize certain in vitro Licensed Laboratory Tests and Test Kits on the terms and conditions set forth in this Agreement.

 

D.                                     Contemporaneously herewith, the Parties are entering into a Stock Purchase Agreement pursuant to which Quest Diagnostics will acquire shares of Ciphergen’s Common Stock and warrants to acquire shares of Ciphergen’s Common Stock to be issued by Ciphergen (the “ Stock Purchase Agreement ”).

 

NOW, THEREFORE, in consideration of the foregoing, the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1.                                       DEFINITIONS .

 

Capitalized terms used in this Agreement will have the meanings respectively ascribed to them in Schedule A hereto.

 

(1)           ProteinChip® is a registered trademark of Ciphergen, but is written in this Agreement without the circle-R mark for convenience.

 

 

2.                                       GENERAL .

 

2.1                                  Strategic Alliance .  Pursuant to the terms and conditions of this Agreement, the Parties hereby form a strategic alliance, purely contractual in nature, and not to be construed as a joint venture of any kind, all as set forth in and subject to the terms and conditions of this Agreement (the “ Strategic Alliance ”).

 

2.2                                  Relationship of the Parties .  The relationship of the Parties pursuant to this Agreement is that of independent contractors.  Nothing in this Agreement is intended or will be deemed to constitute a joint venture, partnership, agency or employer-employee relationship between the Parties.  Neither Party will incur any debts or make any commitments for the other Party.

 

2.3                                  Ciphergen Research and Development Efforts .  Ciphergen has provided to Quest a strategic plan prepared by Ciphergen together with a draft overall budget with respect to the activities that Ciphergen will take in support of the activities in preparation for development of the plans for Licensed Laboratory Tests pursuant to this Agreement.  During the Base Term, Ciphergen will devote sufficient resources to prepare and present to Quest Diagnostics three (3) Plans as contemplated by this Agreement.  Without limiting the generality of the foregoing, Ciphergen shall use commercially reasonable efforts to maintain and fund the Ciphergen Collaboration Agreements (including supplying laboratory equipment, biochips and other supplies, in a manner required by such agreements and otherwise consistent with past practice), use commercially reasonable efforts to maintain its existing Biomarker Discovery Center® laboratories currently devoted to activities directed toward discovery of Biomarkers for Clinical Diagnostic applications, and use commercially reasonable efforts to retain the employees identified in Schedule B , substantially all of whose time will be involved with supporting the activities of Ciphergen under this Agreement.  For clarity, Ciphergen may in its sole discretion determine the specific employees that perform activities under this Agreement and change such employees from time to time.  Subject to the foregoing, Ciphergen in its sole discretion may continue its research and development efforts, including such efforts related to any Ciphergen Platform Technology, or other technologies.  Other than as provided below with respect to Development Programs and Test Kit Development Programs, this Agreement does not impose any research or development requirements upon Ciphergen with respect to any particular Application.  For clarity, nothing herein is intended to prevent Ciphergen from modifying its rights or, obligations under any Collaboration Agreement or, subject to the terms of this Agreement (including without limitation the restrictions under Article 3 and the licenses and restrictions with respect to Ciphergen Collaboration IP under Article 12), otherwise exercising any of its rights under any such Collaboration Agreement, in either case in a manner that would not adversely impact Ciphergen’s ability to perform its obligations under this Agreement.  Except as expressly provided herein, nothing in this Agreement will be deemed by implication to restrict Ciphergen’s development of other products and services within or outside the Field (provided such development does not infringe upon any Intellectual Property of Quest Diagnostics or any of its Affiliates).

 

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2.4                                  Quest Diagnostics Research and Development Efforts .  Quest Diagnostics will use commercially reasonable efforts and provide sufficient resources to develop Licensed Laboratory Tests on the basis of the Development Elections, including by having personnel devoted to the development of such tests as indicated in Schedule B, providing sample management expertise, and providing regulatory advice.  In addition, Quest Diagnostics will provide to Ciphergen certain funding pursuant to the terms of the Credit Agreement, the proceeds of which can only be used to pay costs and expenses directly related to the preparation of Plans and development activities contemplated by this Agreement.  During the Term, Quest Diagnostics in its sole discretion may continue its independent research and development efforts, including such efforts related to any diagnostic testing, diagnostic information, and diagnostic services (provided such development does not infringe upon any Intellectual Property of Ciphergen or any of its Affiliates).  Other than as provided below with respect to Development Programs and Test Kit Development Programs, this Agreement does not impose any research or development requirements upon Quest Diagnostics with respect to any Application.  Except as expressly provided herein, nothing in this Agreement will be deemed by implication to restrict Quest Diagnostics’ development of other products and services within or outside the Field (provided such development does not infringe upon any Intellectual Property of Ciphergen or any of its Affiliates).

 

2.5                                  Steering Committee .  The cooperation of the Parties pursuant to this Agreement will be managed by a committee (the “ Steering Committee ”), which will address issues relating to this Strategic Alliance, including without limitation the selection of tests to be the subject of each Plan, the review of budgets for each Plan, the assessment of each Plan and Plan Supplement and any necessary modifications to the Ciphergen Platform Technology to meet the requirements of the Clinical Diagnostics markets and FDA.  The Steering Committee will also establish the objectives of the Parties with respect to regulatory matters pertaining to Licensed Laboratory Tests and Test Kits under this Agreement, including (i) matters relating to CPT coding by the American Medical Association, reimbursement and coverage of Licensed Laboratory Tests and Test Kit Services by the Centers for Medicare and Medicaid Services, and matters relating to FDA and regulatory agency pre-market review of Test Kits; and (ii) comparable matters in countries outside the United States.  The Steering Committee will provide a written report, no less than once each quarter, to each of the Parties regarding actions taken and proposed to be taken with respect to this Strategic Alliance as well as results achieved and any issues that need to be addressed by the Parties.  The Steering Committee will consist of equal representation from each Party with at least two (2) and no more than three (3) representatives appointed from time to time by each Party (with contemporaneous notice to the other Party), for a total maximum of six (6) members.  Each Party will have the right to remove, provide alternates and substitute such representatives in its sole discretion, and reasonably permit other of its employees to participate in meetings of the Steering Committee as observers, subject to prior advance written notice.  All Steering Committee members, alternates, substitutes, employees and observers will be required to adhere to the same duties of confidentiality set forth in Article 11 hereof.  Any act of the Steering Committee as provided in this Agreement or otherwise will require the approval of (a) a majority of the members present at the meeting (or voting by proxy) and (b) at least one (1) member appointed by each Party.  In the event of deadlock on any issue,

 

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such issue must be resolved by the mutual written agreement of the Parties.  Notwithstanding the foregoing, the Steering Committee cannot bind either or both Parties or amend the Agreement except as expressly agreed to by the Parties in writing.  Meetings of the Steering Committee will occur with such frequency as the Steering Committee will determine, but not less frequently than quarterly.  Unless otherwise agreed, meetings of the Steering Committee will alternate between the offices of the Parties.  The Steering Committee will keep and maintain minutes of its proceedings, which will be approved by the Steering Committee as provided above.  The Steering Committee may appoint one or more working committees for purposes of coordinating the day-to-day activities associated with the development of Licensed Laboratory Tests and Test Kits, which working committees will operate with the same procedures as the Steering Committee.

 

2.6                                  Reports and Access .  During the Base Term, within thirty (30) days after the end of each calendar quarter, Ciphergen will provide Quest Diagnostics with a written report with respect to (a) any developments with respect to Licensed IP that may have a Clinical Diagnostic Application; (b) if applicable, the expected timetable for developing Plans to be presented to Quest Diagnostics, and additional preliminary information regarding such Plans; and (c) financial information regarding the costs and expenses incurred by Ciphergen in connection with this Agreement, as well as a forecast (with comparison to the approved budget) regarding the costs and expenses that Ciphergen expects to incur during the following twelve (12) months, to the extent reasonably necessary to substantiate amounts loaned to Ciphergen pursuant to the Credit Agreement.  Ciphergen additionally will provide such additional information regarding such items as Quest Diagnostics reasonably requests from time to time related to the Strategic Alliance.  Ciphergen will consult with Quest Diagnostics in advance regarding any Applications for which Ciphergen intends to develop a Plan.  Ciphergen will also provide Quest Diagnostics with reasonable access to Ciphergen’s employees and the collaborators under the Ciphergen Collaboration Agreements and such other information as Quest Diagnostics reasonably requests regarding Biomarkers or other intellectual property having potential Clinical Diagnostic Application that are under review or consideration by Ciphergen or under the Ciphergen Collaboration Agreements, in each case for inclusion or included in a Plan.

 

2.7                                  Base Term .  As used in this Agreement, “ Base Term ” means the period beginning on the Effective Date and ending on the earliest of:

 

(a)                                   the date that is three (3) years after the Effective Date; or

 

(b)                                  the date Quest Diagnostics has Commercially Launched three (3) Licensed Laboratory Tests under this Agreement. 

 

Notwithstanding the foregoing, the Parties shall continue activities after the Base Term with respect to the development of a Licensed Laboratory Test and Test Kit to the extent that a Plan has been accepted by Quest Diagnostics pursuant to Section 4.3 during the Base Term but development activities have not been completed during the Base Term for

 

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a Licensed Laboratory Test and/or a Test Kit with respect to such Plan.  This obligation shall expire two (2) years after the end of the Base Term.

 

3.                                       RIGHTS OF EXCLUSIVITY .

 

3.1                                  In the Exclusive Territory .

 

(a)                                   Rights for the Licensed Laboratory Tests in the Exclusive Territory .  Quest Diagnostics will have the exclusive right (even as to Ciphergen) in the Exclusive Territory to market Licensed Laboratory Tests developed pursuant to any Development Program and to perform such Licensed Laboratory Tests through the Quest Network, subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof.  With respect to each Licensed Laboratory Test, Quest Diagnostics’ exclusivity under this Section 3.1(a) will expire upon the expiration of the Exclusive Period therefor and thereafter become nonexclusive with respect to such Licensed Laboratory Test in the Exclusive Territory.  During such Exclusive Period, Ciphergen will not have the right to market or perform Licensed Laboratory Tests in the Exclusive Territory.

 

(b)                                  Rights for the Test Kits in the Exclusive Territory .  Quest Diagnostics will have the right (which will be exclusive during the Exclusive Period for a particular Test Kit with respect to Commercial Clinical Laboratories) in the Exclusive Territory to purchase such Test Kits from Ciphergen, to market Test Kit Services, and to provide Test Kit Services through the Quest Network, subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof.  With respect to each Test Kit, Quest Diagnostics’ exclusivity under this Section 3.1(b) will expire upon the expiration of the Exclusive Period therefor and thereafter become nonexclusive with respect to such Test Kit in the Exclusive Territory.  During such Exclusive Period, Ciphergen will not have the right to market or perform Test Kit Services in the Exclusive Territory.  Notwithstanding the foregoing, Ciphergen will have the exclusive right (even as to Quest Diagnostics) to manufacture and have manufactured Test Kits and to market, distribute, sell, import, or otherwise commercialize Test Kits in the Exclusive Territory solely for Permitted Sales, as set forth in Section 8.1 hereof.

 

3.2                                  In the Non-Exclusive Territory .

 

(a)                                   Rights for the Licensed Laboratory Tests in the Non-Exclusive Territory .  Quest Diagnostics will have a non-exclusive right in the Non-Exclusive Territory to market Licensed Laboratory Tests developed pursuant to any Development Program and to perform such Licensed Laboratory Tests through the Quest Network, subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof. 

 

(b)                                  Rights for the Test Kits in the Non-Exclusive Territory .  Quest Diagnostics will have a non-exclusive right in the Non-Exclusive Territory to purchase Test Kits from Ciphergen, to market Test Kit Services, and to provide Test Kit Services, in

 

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each case through the Quest Network and subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof.  Quest Diagnostics will not have the right to manufacture, have manufactured, market, distribute, sell, import, or otherwise commercialize any Test Kit in the Non-Exclusive Territory.  Ciphergen will have the exclusive right (even as to Quest Diagnostics) to manufacture, have manufactured, market, distribute, sell, import, or otherwise commercialize Test Kits in the Non-Exclusive Territory.

 

3.3                                  In the Restricted Territory .

 

(a)                                   Rights for the Licensed Laboratory Tests in the Restricted Territory.   Quest Diagnostics will also have a non-exclusive right in the Restricted Territory to market Licensed Laboratory Tests developed pursuant to any Development Program and perform such Licensed Laboratory Tests through the Quest Network, subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof and subject to any rights granted by Ciphergen to a Third Party in the Restricted Territory after the Effective Date which have been noticed to Quest Diagnostics in accordance with this Section 3.3(a).  Ciphergen may, in its sole discretion and at any time, grant one or more Third Parties rights (whether exclusive, non-exclusive or otherwise) to market, perform, or otherwise commercialize such Licensed Laboratory Test in the Restricted Territory (“ Restricted Territory Laboratory Test Rights ”) regardless of whether such Restricted Territory Laboratory Test Rights would exclude Quest Diagnostics from having, partially or entirely, any rights to such Licensed Laboratory Tests in any or all jurisdictions within the Restricted Territory.  Ciphergen shall notify Quest Diagnostics in writing thirty (30) or fewer days prior to the anticipated execution of any agreement (the “ Anticipated Execution Date ”) pursuant to which Ciphergen intends to grant to a Third Party Restricted Territory Laboratory Test Rights.  Thereafter, Ciphergen shall notify Quest Diagnostics in writing of the actual execution of such agreement, which notice shall describe the general scope of the Restricted Territory Laboratory Test Rights, including if and how such Restricted Territory Laboratory Test Rights restrict Quest Diagnostics’ rights with respect to Licensed Laboratory Tests in the Restricted Territory granted under this Section 3.3(a), and such restrictions shall be effective the later of thirty (30) days after the Anticipated Execution Date or the effective date of such Third Party agreement.

 

(b)                                  Rights for the Test Kits in the Restricted Territory.   Quest Diagnostics will have the non-exclusive right in the Restricted Territory to purchase Test Kits from Ciphergen, to market Test Kit Services, and to provide Test Kit Services, subject to payment of royalties and fees as provided in Section 6.3 and Article 9 hereof and subject to any rights granted by Ciphergen to a Third Party in the Restricted Territory after the Effective Date which have been noticed to Quest Diagnostics in accordance with this Section 3.3(b).  Ciphergen may, in its sole discretion and at any time, grant one or more Third Parties rights (whether exclusive, non-exclusive or otherwise) to purchase Test Kits from Ciphergen, market Test Kit Services, and/or provide or otherwise commercialize Test Kit Services in the

 

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Restricted Territory (“ Restricted Territory Test Kit Rights ”) regardless of whether such Restricted Territory Test Kit Rights would exclude Quest Diagnostics from having, partially or entirely, from any rights to such Test Kits in any or all jurisdictions within the Restricted Territory.  Ciphergen shall notify Quest Diagnostics in writing by the Anticipated Execution Date pursuant to which Ciphergen grants to a Third Party Restricted Territory Test Kit Rights.  Thereafter, Ciphergen shall notify Quest Diagnostics in writing of the actual execution of such agreement, which notice shall describe the general scope of the Restricted Territory Test Kit Rights, including if and how such Restricted Territory Test Kit Rights restrict Quest Diagnostics’ rights with respect to Test Kits in the Restricted Territory granted under this Section 3.3(b), and such restrictions shall be effective the later of thirty (30) days after the Anticipated Execution Date or the effective date of such Third Party agreement.  Quest Diagnostics will not have the right to manufacture, have manufactured, market, distribute, sell, import, or otherwise commercialize any Test Kit in the Restricted Territory.  Ciphergen will have the exclusive right (even as to Quest Diagnostics) to manufacture, have manufactured, market, distribute, sell, import, or otherwise commercialize Test Kits in the Restricted Territory.

 

(c)                                   Samples from the Restricted Territory.   Notwithstanding the provisions of Section 3.3(a) and (b) hereof, Quest Diagnostics will have the right to perform Licensed Laboratory Tests and provide Test Kit Services outside the Restricted Territory on patient samples originating from the Restricted Territory.  For clarity and without limiting the foregoing, Quest Diagnostics may conduct marketing and promotional activities in the Restricted Territory in which Ciphergen has an agreement with one or more Third Parties granting Restricted Territory Laboratory Test Rights or Restricted Territory Test Kit Rights, as applicable, in such jurisdiction but only in connection with the promotion of Quest Diagnostics’ overall testing capabilities or the offer or sale of other tests performed by Quest Diagnostics or another member of the Quest Network.

 

3.4                                  N on-Compete for Commercial Clinical Laboratories in the Exclusive Territory .  During the Base Term, Ciphergen will not license to any Commercial Clinical Laboratory any Ciphergen Licensed Technology (whether or not within the Field) or otherwise collaborate with or license to any Commercial Clinical Laboratory (including any Commercial Clinical Laboratory outside the Exclusive Territory) any Intellectual Property with respect to the development or performance of any Clinical Diagnostic Application (whether or not within the Field and whether or not involving the use of Ciphergen Licensed Technology), except to the extent that:

 

(a)                                   Quest Diagnostics makes a Pass Election with respect to a Plan, or revokes a Development Election, involving such Ciphergen Licensed Technology or other Intellectual Property (in which case Ciphergen may pursue the Application on the terms provided in Section 4.6 hereof); or

 

(b)                                  The collaboration or license involves activities within the Restricted Territory with a Third Party, which Third Party does not own or manage (directly or

 

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through an Affiliate) a Commercial Clinical Laboratory in the United States, for no more than one (1) Application once Ciphergen has presented the first plan to Quest Diagnostics pursuant to Section 4.1 hereof (the “ First Plan ”), for no more than two (2) Applications after Ciphergen has presented two (2) Plans to Quest Diagnostics pursuant to Section 4.1 hereof and for any number of Applications after Ciphergen has presented three (3) Plans to Quest Diagnostics pursuant to Section 4.1, provided, however , that such Applications are not the subject of any Development Programs or proposed Plans and are directed towards health conditions for which the market opportunities in the Exclusive Territory are insufficient to render the development of such Applications for the Exclusive Territory commercially reasonable (e.g., [***]) and further provided that if Ciphergen is to perform significant development or similar activities under any such collaboration or license it can reasonably demonstrate that the performance of such activities are not likely to interfere with the performance by Ciphergen of its obligations under this Agreement; or

 

(c)                                   it constitutes a Permitted Sale of Test Kits to Commercial Clinical Laboratories as permitted under Section 8.1 of this Agreement.

 

3.5                                  Collaboration with other Diagnostics Companies .  Except as contemplated by this Agreement, during the six (6) month period after execution of this Agreement, Ciphergen will not establish any collaboration, licensing or similar arrangement with any other commercial Clinical Diagnostics company and thereafter Ciphergen will not take any actions inconsistent with the terms of this Agreement.  During the Base Term, except as contemplated by this Agreement, Ciphergen will not establish any collaboration, licensing or similar arrangement with any other Commercial Clinical Laboratory to develop any laboratory tests or to develop any FDA-cleared biochips, test kits or supplies except to the extent that Ciphergen has presented a Plan with respect to such arrangement to Quest Diagnostics and the Parties have been unable to reach agreement on such arrangement within sixty (60) days of Quest Diagnostics receipt of such Plan.  Notwithstanding the foregoing, Ciphergen may license a commercial Clinical Diagnostics company (other than a Commercial Clinical Laboratory) to manufacture or commercialize FDA-cleared biochips, test kits or supplies based on Licensed Laboratory Tests developed pursuant to this Strategic Alliance, subject to the rights of Quest Diagnostics under Article 8.  Nothing contained in Section 3.2(a) or Section 3.3(a) shall be deemed to permit Ciphergen to license any other Commercial Clinical Laboratory to develop any Licensed Laboratory Test that is the subject of a Development Program or proposed Plan under this Strategic Alliance (as opposed to licensing a Commercial Clinical Laboratory in the Non Exclusive Territory or the Restricted Territory to perform the applicable clinical laboratory tests using Proprietary Supplies as to which Quest Diagnostics would be entitled to receive a fee on the terms contemplated by Section 8.2(a)(ii)).

 

3.6                                  Non-Compete for Licensed Laboratory Tests and Test Kits .  Quest Diagnostics and its Affiliates will not be under any restriction from developing or commercializing any Clinical Laboratory Tests, test kits or other products or services that may compete with

 

***                            Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the commission. ***

 

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any Licensed Laboratory Test or Test Kit that has been developed (or is under development) under any Development Program, provided that such development does not infringe any Intellectual Property of Ciphergen or its Affiliates.  During the Exclusive Period for a Licensed Laboratory Test or Test Kit, Ciphergen and its Affiliates will not develop or commercialize any Clinical Laboratory Tests, test kits or other products or services that are directed at the same Application as such Licensed Laboratory Test or Test Kit that has been developed (or is under development) under any Development Program or establish any collaboration, licensing or similar arrangement with any Clinical Diagnostics Company (other than Quest Diagnostics) to do so.  Except as provided under this Agreement, during the Base Term, Ciphergen shall not perform any Clinical Laboratory Tests (except as reasonably necessary in connection with the development of Test Kits).

 

3.7                                  Non-Solicitation .  For the period commencing on the Effective Date and ending one (1) year following the date of the commercialization of the last Test Kit commercialized under this Agreement, neither Party will hire, solicit, induce, encourage or attempt to induce or encourage any employee of the other Party who has been involved with this Strategic Alliance governed by this Agreement to terminate his or her employment with such other Party or to breach any other obligation to such other Party, and each of the Parties hereto agrees to maintain an updated list of employees deemed to be involved with this Strategic Alliance for purposes of this Section 3.7, which list will be made available to the other Party at its request.  

 

3.8                                  Third Party Conflicts .  Each Party will ensure that its future agreements with Third Parties do not conflict with any provision of this Agreement and have covenants that provide the other Party with the rights expressly contemplated by this Agreement.

 

3.9                                  Ciphergen Customer Contracts .  During the Base Term, Ciphergen will (consistent with Ciphergen’s past practices):

 

(a)                                   Except as otherwise provided herein, include in its supply and related contracts a covenant restricting use of instruments and supplies involving SELDI Technology to “research use only.”

 

(b)                                  Subject to subsection (c) hereof, use commercially reasonable efforts to ensure that its instruments, biochips and supplies involving SELDI Technology are not supplied to Commercial Clinical Laboratories located outside the Restricted Territory (i.e., located in the Exclusive Territory or Non-Exclusive Territory).  Ciphergen will cease providing supplies to any such Commercial Clinical Laboratories located outside the Restricted Territory to the extent the law permits.  Notwithstanding the foregoing, Ciphergen shall have the right to continue to supply [***] instruments, biochips and supplies involving SELDI Technology in accordance with the [***] by and between [***] and Ciphergen, effective May 6, 2003 (the [***]), and nothing in this Agreement is intended to limit or otherwise restrict Ciphergen’s right to supply [***] in accordance with the [***]

 

***                            Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the commission. ***

 

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(c)                                   Use commercially reasonable efforts to obtain exclusive diagnostic rights for the Exclusive Territory with respect to any Intellectual Property developed by Third Parties using instruments or supplies involving SELDI Technology that are supplied by Ciphergen.

 

3.10                            Passive Sales .  To the extent required by law, nothing in this Agreement shall prevent passive sales of Test Kits and Test Kit Services in the applicable jurisdictions.

 

4.                                       PRESENTATION AND REVIEW OF PLANS; ELECTIONS BY QUEST DIAGNOSTICS .

 

4.1                                  Identification of Applications; Preparation of Plans .  During the Base Term, Ciphergen expects from time to time to discover or otherwise identify Ciphergen Licensed Technology or other technology that enables the development of an Application within the Field.  Ciphergen will use commercially reasonable efforts to provide Quest Diagnostics with at least three (3) Plans during the first two (2) years of the Base Term, with the first Plan to be provided within three (3) months after the Effective Date and the next two (2) Plans to be provided one (1) approximately every six (6) months thereafter.  At such time as Ciphergen believes any Application has sufficient supporting data, including data related to commercial potential, to render it appropriate for development, Ciphergen will review with the Steering Committee whether it would be appropriate to prepare a Plan for such Application.  The intent of the Parties is for the Steering Committee to select the tests to be developed based on medical need, market potential and likelihood of success.  Following agreement by the Steering Committee of a particular Application, Ciphergen will use commercially reasonable efforts to promptly prepare a Plan for each such Application, and to obtain such consents under the Ciphergen Collaboration Agreements necessary to effectuate the Plan.  Notwithstanding the foregoing, the Parties agree that the Application for the First Plan will be [***].

 

4.2                                  Presentation of Plans .  Promptly after preparing any Plan, except as described below, Ciphergen will present and offer the Plan to Quest Diagnostics for its review.

 

4.3                                  Review of Plans .  Within sixty (60) days from the receipt of any Plan from Ciphergen, Quest Diagnostics will review such Plan and use commercially reasonable efforts to provide Ciphergen with a Plan Supplement with respect to such Plan.  Within ninety (90) days from the receipt of any Plan from Ciphergen (a “ Plan Review Period ”), Quest Diagnostics will determine whether to accept the Plan and make a Development Election or reject the Plan and make a Pass Election for the Application.  In the event that the Plan does not include the information required by Schedule C (a “ Plan Deficiency ”) and Quest Diagnostics notifies Ciphergen of such deficiency within thirty (30) days after receipt of the Plan, the Plan Review Period will not begin until Ciphergen presents to Quest Diagnostics a Plan that remedies such Plan Deficiency; provided, however, that if the Plan Deficiency is associated with the preliminary assessment of the projected cost of obtaining freedom to operate with respect to any Third Party patent rights related to Ciphergen Licensed IP that may be desirable for the commercialization of the Licensed Laboratory Test that is the subject of the Plan in the Exclusive Territory, then the Plan will not be regarded as having a Plan Deficiency, the Plan Review Period will be

 

***                            Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the commission. ***

 

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extended by thirty (30) days, and the Parties will use commercially reasonable efforts to cooperate and address such preliminary assessment.  If Quest Diagnostics does not notify Ciphergen of a Plan Deficiency within thirty (30) days after receipt of such Plan, the Plan will be deemed not to have a Plan Deficiency.  During the Plan Review Period, Ciphergen will afford Quest Diagnostics’ officers and employees full access to the information and data related to such Plan and its corresponding Application, such access to include meetings with such officers and employees of Ciphergen as Quest Diagnostics reasonably requests, and Ciphergen will provide such additional information as Quest Diagnostics reasonably requests related to the Application and the Plan as promptly as practicable.  During the Base Term, the Steering Committee will have the responsibility for making any appropriate modification to the Plan.  Notwithstanding the foregoing, the Parties understand with respect to the First Plan that time is of the essence and each Party shall use its commercially reasonable efforts to expedite the preparation, delivery and acceptance process for the First Plan.

 

4.4