Exhibit 10.1

EXECUTION VERSION

TAX MATTERS AGREEMENT

BY AND BETWEEN

ILLUMINA, INC.

AND

GRAIL, LLC

(to be converted into GRAIL, INC.)

DATED AS OF June 21, 2024

TABLE OF CONTENTS

 

		Page
Section 1. Definition of Terms			1
Section 2. Allocation of Tax Liabilities and Tax-Related Losses			9
Section 2.01. General Rule			9
Section 2.02. Allocation Principles			10
Section 2.03. Allocation Conventions			10
Section 3. Preparation and Filing of Tax Returns			11
Section 3.01. Illumina Separate Returns and Joint Returns			11
Section 3.02. GRAIL Separate Returns			11
Section 3.03. Tax Reporting Consistent with Intended Tax Treatment			11
Section 3.04. Protective Section 336(e) Elections			11
Section 3.05. GRAIL Carrybacks and Claims for Refund			12
Section 3.06. Apportionment of Tax Attributes			13
Section 4. Tax Payments			13
Section 4.01. Taxes Shown on Tax Returns			13
Section 4.02. Adjustments Resulting in Underpayments			13
Section 4.03. Indemnification Payments			13
Section 5. Tax Refunds			14
Section 6. Intended Tax Treatment			14
Section 6.01. Restrictions on Members of the GRAIL Group			14
Section 6.02. Restrictions on Members of the Illumina Group			16
Section 6.03. Tax Opinions			16
Section 6.04. Procedures Regarding Opinions and Post-Distribution Rulings			16
Section 6.05. Liability for Specified Separation Taxes and Tax-Related Losses			17
Section 6.06. Planned Acquisitions			18
Section 7. Assistance and Cooperation			18
Section 7.01. Assistance and Cooperation			18
Section 8. Tax Records			20
Section 8.01. Retention of Tax Records			20
Section 8.02. Access to Tax Records			20
Section 8.03. Preservation of Privilege			20

Section 9. Tax Contests			21
Section 9.01. Notice			21
Section 9.02. Control of Tax Contests			21
Section 10. Survival of Obligations			23
Section 11. Tax Treatment of Payments			23
Section 11.01. General Rule			23
Section 11.02. Interest			23
Section 12. Indemnification Payments			23
Section 13. General Provisions			24
Section 13.01. Complete Agreement			24
Section 13.02. Counterparts			24
Section 13.03. Notices			24
Section 13.04. Waivers of Default			25
Section 13.05. Amendments			26
Section 13.06. Assignability			26
Section 13.07. Subsidiaries			26
Section 13.08. Headings			26
Section 13.09. Governing Law			26
Section 13.10. Waiver of Jury Trial			26
Section 13.11. Specific Performance			27
Section 13.12. Severability			27
Section 13.13. Payment Terms			27
Section 13.14. No Admission of Liability			28

TAX MATTERS AGREEMENT

This Tax Matters Agreement (this “Agreement”) is entered into effective as of June 21, 2024, by and between Illumina, Inc., a Delaware corporation (“Illumina”), and GRAIL, LLC, a wholly owned subsidiary of Illumina and a Delaware limited liability company (“GRAIL LLC”), to be converted to a corporation and renamed GRAIL, Inc. prior to the Distribution (“GRAIL”). Illumina and GRAIL are each a “Party” and are sometimes referred to herein collectively as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Section 1 of this Agreement.

RECITALS

WHEREAS, Illumina, acting together with its Subsidiaries, currently conducts the Illumina Business and GRAIL, acting together with its Subsidiaries, currently conducts the GRAIL Business;

WHEREAS, Illumina and GRAIL have entered into a Separation and Distribution Agreement, dated as of June 21, 2024 (the “Separation Agreement”), pursuant to which the Separation will be consummated;

WHEREAS, Illumina intends to contribute the Disposal Funding to GRAIL pursuant to Section 3.1 of the Separation Agreement and GRAIL intends to convert from a Delaware limited liability company into a Delaware corporation in accordance with the Delaware Limited Liability Company Act (such contribution and conversion, the “Contribution”);

WHEREAS, pursuant to the Separation Agreement, Illumina intends to effect the Distribution and retain the Retained Stock;

WHEREAS, the Parties intend that the Distribution, together with the Contribution and certain related transactions, each qualify for their Intended Tax Treatment;

WHEREAS, Illumina and GRAIL desire to set forth their agreement on the rights and obligations of Illumina and GRAIL and the members of the Illumina Group and the GRAIL Group, respectively, with respect to (A) the administration and allocation of federal, state, local, and foreign Taxes incurred in Tax Periods beginning prior to the Distribution Date, (B) Taxes resulting from the Distribution and transactions effected in connection therewith and (C) various other Tax matters.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

Section 1. Definition of Terms. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Separation Agreement.

“Adjusted Grossed-Up Basis” has the meaning set forth in Section 3.04(b) of this Agreement.

“Adjustment Request” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (i) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (ii) any claim for equitable recoupment or other offset, and (iii) any claim for refund or credit of Taxes previously paid.

“Aggregate Deemed Asset Disposition Price” has the meaning set forth in Section 3.04(b) of this Agreement.

“Agreement” has the meaning set forth in the recitals to this Tax Matters Agreement.

“Capital Stock” means all classes or series of capital stock of a corporation, including (i) common stock, (ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in such corporation for U.S. federal Income Tax purposes.

“Closing of the Books Method” means the apportionment of items between portions of a Tax Period based on a closing of the books and records on the close of the Distribution Date (in the event that the Distribution Date is not the last day of the Tax Period, as if the Distribution Date were the last day of the Tax Period), subject to adjustment for items accrued on the Distribution Date that are properly allocable to the Tax Period following the Distribution Date, as jointly determined by Illumina and GRAIL; provided, however, that with respect to Property Taxes, such apportionment shall be on the basis of elapsed days during the relevant portion of the Tax Period; provided further, however, that any items required to be included in the gross income of a U.S. shareholder (as defined in Section 951(b) of the Code) under Sections 951 or 951A of the Code (or any similar provision of state, local or foreign Tax Law) for a Straddle Period shall be apportioned between the Pre-Distribution Period and Post-Distribution Period as if the taxable year of each member of the Illumina Group and GRAIL Group that is a controlled foreign corporation within the meaning of Section 957 of the Code ended on the Distribution Date.

“Code” means the Internal Revenue Code of 1986, as amended.

“Contribution” has the meaning set forth in the recitals to this Agreement.

“Controlling Party” has the meaning set forth in Section 9.02(c) of this Agreement.

“Employee Matters Agreement” means that Employee Matters Agreement, by and between Illumina and GRAIL, dated as of June 21, 2024.

 

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“Final Determination” means the final resolution of liability for any Tax for any taxable period by or as a result of (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement, compromise or other agreement with the relevant Tax Authority, an agreement that constitutes a determination under Section 1313(a)(4) of the Code, an agreement contained in an IRS Form 870-AD, a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code or a comparable agreement under state, local or non-U.S. Law; (iii) the expiration of the applicable statute of limitations; or (iv) the payment of the Tax by a Party (or its Affiliate) that is responsible for payment of that Tax under applicable Law, including with respect to any item disallowed or adjusted by a Tax Authority, as long as both Parties agree that no action should be taken to recoup that payment.

“GRAIL” has the meaning provided in the preamble to this Agreement.

“GRAIL ATB” has the meaning set forth in Appendix B.

“GRAIL Disqualifying Act” means, with respect to any Specified Separation Taxes, (a) any act, or failure or omission to act, including, without limitation, the breach of any covenant or representation contained herein, by any member of the GRAIL Group following the Distribution that results in any Party (or any of its Affiliates) being liable for such Specified Separation Taxes pursuant to a Final Determination, regardless of whether such act or failure to act is covered by a Post-Distribution Ruling or Unqualified Tax Opinion, (b) any event (or series of events) involving Capital Stock of GRAIL or any assets of any member of the GRAIL Group other than the retention or disposition of any Retained Stock by Illumina or any other member of the Illumina Group, or (c) any failure to be true, inaccuracy in, or breach of any of the representations or statements contained in the Tax Materials to the extent descriptive of or otherwise relating to GRAIL or any member of the GRAIL Group or the GRAIL Business; provided, that no action required by this Agreement, the Separation Agreement or any Ancillary Agreement shall be considered a GRAIL Disqualifying Act.

“GRAIL Equity Awards” means options, share appreciation rights, restricted shares, share units or other compensatory rights with respect to GRAIL Stock.

“GRAIL SAG” means the separate affiliated group of GRAIL, within the meaning of Section 355(b)(3)(B) of the Code and the Treasury Regulations promulgated thereunder.

“GRAIL Separate Return” means any Tax Return of or including any member of the GRAIL Group (including any consolidated, combined or unitary return) that does not include any member of the Illumina Group.

“Illumina Disqualifying Act” means, with respect to any Specified Separation Taxes, (a) any act, or failure or omission to act, including, without limitation, the breach of any covenant or representation contained herein or in the Tax Materials, by any member of the Illumina Group following the Distribution that results in any Party (or any of its Affiliates) being liable for such Specified Separation Taxes pursuant to a Final Determination, (b) any event (or series of events) involving Capital Stock of Illumina or any assets of any member of the Illumina Group, (c) any failure to be true, inaccuracy in, or breach of any of the representations or statements contained in the Tax Materials to the extent descriptive of or otherwise relating to Illumina or any member of the Illumina Group or the Illumina Business or (d) the retention or disposition of any Retained Stock by Illumina or any other member of the Illumina Group; provided, that no action required by this Agreement, the Separation Agreement or any Ancillary Agreement shall be considered an Illumina Disqualifying Act.

 

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“Illumina Investor Selloff” means 13.1%. The Illumina Investor Selloff is intended to represent dispositions of Illumina Capital Stock in the two-year period ending on the Distribution Date by any ten-percent (10%) shareholder of Illumina Capital Stock (within the meaning of Treasury Regulation § 1.355-7(h)(14)). For the avoidance of doubt, the Illumina Investor Selloff will equal 13.1% regardless of the actual amount of Illumina Capital Stock disposed of by any such ten-precent shareholder of Illumina Capital Stock in such two-year period.

“Illumina Separate Return” means any Tax Return of or including any member of the Illumina Group (including any consolidated, combined or unitary return) that does not include any member of the GRAIL Group.

“Illumina Tax Opinion” means any opinions or memoranda, as applicable, of Cravath, Swaine & Moore LLP, in form and substance satisfactory to Illumina in its sole discretion, deliverable to Illumina in connection with the Distribution with respect to the qualification of the Separation, Distribution and certain related transactions for their Intended Tax Treatment.

“Income Tax” means all U.S. federal, state, local and foreign income, franchise or similar Taxes imposed on (or measured by) net income or net profits, and any interest, penalties, additions to Tax or additional amounts in respect of the foregoing.

“Intended Tax Treatment” has the meaning set forth in Appendix A.

“Interest Rate” means, with respect to a date, the rate per annum in effect for such date for underpayments under Section 6621 of the Code.

“IRS” means the U.S. Internal Revenue Service or any successor agency.

“Joint Return” means any Tax Return that includes, by election or otherwise, one or more members of the Illumina Group together with one or more members of the GRAIL Group.

“Non-Controlling Party” has the meaning set forth in Section 9.02(c) of this Agreement.

“Notified Action” shall have the meaning set forth in Section 6.04(a) of this Agreement.

“Other Separation Taxes” means any Taxes imposed on any member of the Illumina Group or the GRAIL Group in connection with the transactions comprising the Separation, other than Specified Separation Taxes.

 

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“Ordinary Taxes” means Taxes other than (i) Specified Separation Taxes and (ii) Other Separation Taxes.

“Parties” and “Party” have the meaning set forth in the preamble to this Agreement.

“Payment Date” means, with respect to a Tax Return, (A) the due date for any required installment of estimated Taxes, (B) the due date (determined without regard to extensions) for filing such Tax Return, or (C) the date such Tax Return is filed, as the case may be.

“Payor” has the meaning set forth in Section 4.03(a) of this Agreement.

“Planned Acquisitions” means (A) the retention or disposition of the Retained Stock and (B) the Illumina Investor Selloff.

“Post-Distribution Period” means any Tax Period beginning after the Distribution Date and, in the case of any Straddle Period, the portion of such Tax Period beginning on the day after the Distribution Date.

“Post-Distribution Ruling” means a ruling from the IRS in form and substance satisfactory to Illumina in its reasonable discretion to the effect that a transaction will not adversely affect any Intended Tax Treatment.

“Pre-Distribution Period” means any Tax Period ending on or before the Distribution Date and, in the case of any Straddle Period, the portion of such Straddle Period ending on and including the Distribution Date.

“Pre-Distribution Ruling” means any U.S. federal income Tax ruling and any supplements thereto, issued before the Distribution to Illumina by the IRS in connection with the Distribution and any related transactions.

“Pre-Distribution Ruling Request” means any information provided by Illumina or its Tax Advisors to the IRS in connection with a Pre-Distribution Ruling.

“Prior Group” means any group that filed or was required to file (or will file or be required to file) a Tax Return, for a Tax Period or portion thereof ending at or prior to the close of the Distribution Date, on an affiliated, consolidated, combined, unitary, fiscal unity or other group basis (including as permitted by Section 1501 of the Code) that includes at least one member of the Illumina Group and at least one member of the GRAIL Group.

“Privilege” means any privilege that may be asserted under applicable law, including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

 

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“Proposed Acquisition Transaction” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations § 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by GRAIL management or shareholders, is a hostile acquisition, or otherwise, as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, any shares of Capital Stock in GRAIL that would, when combined with the Planned Acquisitions and any other post-Distribution direct or indirect acquisitions or changes in ownership of the Capital Stock in GRAIL for purposes of Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, aggregate to forty-five percent 45% or more of the total combined value or voting power of all outstanding shares of Capital Stock of GRAIL as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction in such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by GRAIL of a shareholder rights plan, (ii) issuances by GRAIL that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations § 1.355-7(d), including such issuances net of exercise price and/or tax withholding (provided, however, that any sale of such stock in connection with a net exercise or tax withholding is not exempt under this clause (ii) unless it satisfies the requirements of Safe Harbor VII of Treasury Regulations § 1.355-7(d)) or (iii) acquisitions that satisfy Safe Harbor VII of Treasury Regulations § 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. For purposes of this definition, each reference to GRAIL shall include a reference to any entity treated as a successor thereto. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.

“Protective Section 336(e) Election” has the meaning set forth in Section 3.04(a) of this Agreement.

“Representation Letter” means the officer’s certificate delivered or deliverable by Illumina, and any of its Affiliates, in connection with the Illumina Tax Opinion.

“Required Party” has the meaning set forth in Section 4.03(a) of this Agreement.

“Responsible Party” means, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return under this Agreement.

“Retained Stock” means any Capital Stock in GRAIL that Illumina retains after the Distribution.

“Retention Date” has the meaning set forth in Section 8.01 of this Agreement.

 

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“Section 336(e) Allocation Statement” has the meaning set forth in Section 3.04(b) of this Agreement.

“Section 336(e) Tax Benefit Percentage” means, with respect to any Specified Separation Taxes and Tax-Related Losses related to the Distribution, the percentage equal to one hundred percent (100%) minus the percentage of such Specified Separation Taxes and Tax-Related Losses related to the Distribution for which Illumina is entitled to indemnification under this Agreement.

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

“Specified Repurchases or Redemptions” means repurchases or redemptions of GRAIL stock by GRAIL that satisfy the following criteria: (i) the repurchase or redemption is motivated by a non-tax business purpose, (ii) the stock to be repurchased or redeemed is widely held, (iii) the repurchase or redemption is made in the open market or from or through a securities brokerage or investment bank that is not related to GRAIL at an agreed price or formula (including through a call option or derivative), as part of a repurchase program (including an accelerated share repurchase program) in which the securities brokerage or investment bank purchases shares of stock of GRAIL from anonymous sellers, (iv) the repurchase or redemption is not motivated to any extent by a desire to increase or decrease the ownership percentage of any particular shareholder or group of shareholders, and (v) GRAIL will not know the identity of any shareholder from which its stock is redeemed or repurchased; provided that, no repurchase or redemption will be considered a Specified Repurchase or Redemption if at the time of the repurchase or redemption any shareholder of GRAIL was either (A) a controlling shareholder (within the meaning of Treasury Regulations § 1.355-7(h)(3)), (B) a ten-percent shareholder (within the meaning of Treasury Regulations § 1.355-7(h)(14)) or (C) a member of a controlled group of corporations within the meaning of Section 1563 of the Code of which GRAIL is a member.

“Specified Separation Taxes” means any and all Taxes incurred by the Illumina Group or the GRAIL Group as a result of the failure of the Separation, Distribution or certain related transactions to qualify for any Intended Tax Treatment; provided, however, that the failure of any particular amount of Tax Attributes to be in existence at the Distribution shall not be treated as Specified Separation Taxes; provided further, however, that Specified Separation Taxes shall be indemnified regardless of whether they are paid in cash or by utilizing Tax Attributes.

“Straddle Period” means any Tax Period that begins before and ends after the Distribution Date.

“Tax” or “Taxes” means any tax, assessments, duty or similar charge of any kind whatsoever imposed by any Governmental Authority or political subdivision thereof, in each case in the nature of a tax, and any interest, penalty, additions to tax or additional amounts in respect of the foregoing.

 

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“Tax Advisor” means a Tax counsel or accountant, in each case of recognized national standing.

“Tax Attribute” means a net operating loss, net capital loss, unused investment credit, unused foreign Tax credit, excess charitable contribution, general business credit, research and development credit, earnings and profits, basis, or any other Tax Item that could reduce a Tax or create a Tax Benefit.

“Tax Authority” means, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

“Tax Benefit” means any refund, credit, or other item that causes reduction in otherwise required liability for Taxes.

“Tax Contest” means an audit, review, examination, contest, litigation, investigation or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).

“Tax Item” means, with respect to any Income Tax, any item of income, gain, loss, deduction, or credit.

“Tax Law” means the Law of any Governmental Authority or political subdivision thereof relating to any Tax.

“Tax Materials” means all Pre-Distribution Rulings, Pre-Distribution Ruling Requests, the Illumina Tax Opinion, and Representation Letters.

“Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

“Tax Records” means any (i) Tax Returns, (ii) Tax Return workpapers, (iii) documentation relating to any Tax Contests, and (iv) any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) maintained or required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority, in each case filed or required to be filed with respect to or otherwise relating to Taxes.

“Tax-Related Losses” means, with respect to any Specified Separation Taxes, (i) all accounting, legal and other professional fees, and court costs incurred in connection with such Specified Separation Taxes, as well as any other out-of-pocket costs incurred in connection with such Specified Separation Taxes; and (ii) all costs, expenses and damages associated with shareholder litigation or controversies and any amount paid by Illumina (or any Illumina Affiliate) or GRAIL (or any GRAIL Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority.

 

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“Tax Return” means any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed under the Code or other Tax Law with respect to Taxes, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, which Tax Advisor is reasonably acceptable to Illumina, on which Illumina is permitted to rely to the effect that a transaction will not adversely affect any Intended Tax Treatment; provided, that if the Illumina Tax Opinion is not an unqualified “will” opinion with respect to any Intended Tax Treatment, the Unqualified Tax Opinion shall be at the same level of comfort, and subject to the same qualifications, as the Illumina Tax Opinion with respect to such Intended Tax Treatment. The Tax Advisor, in issuing its opinion, shall be permitted to rely on the validity and correctness, as of the date given, of any Pre-Distribution Ruling and the Illumina Tax Opinion, unless such reliance would be unreasonable under the circumstances as a result of a change in Law or facts following the Distribution, and shall assume that the Distribution, Contribution and any related transaction, as applicable, would have qualified for its Intended Tax Treatment if the transaction in question did not occur.

Section 2. Allocation of Tax Liabilities and Tax-Related Losses.

Section 2.01. General Rule.

(a) Illumina Liability. Except with respect to Taxes and Tax-Related Losses described in Section 2.01(b) of this Agreement, Illumina shall be liable for, and shall indemnify and hold harmless the GRAIL Group from and against any liability for:

(i) Taxes that are allocated to Illumina under this Section 2;

(ii) any Taxes resulting from a breach of any of Illumina’s representations, warranties or covenants in this Agreement, the Separation Agreement or any Ancillary Agreement;

(iii) Specified Separation Taxes and Tax-Related Losses that are allocated to Illumina under Section 6.05(a) of this Agreement;

(iv) Other Separation Taxes; and

(v) Taxes imposed on GRAIL or any member of the GRAIL Group pursuant to the provisions of Treasury Regulations § 1.1502-6 (or similar provisions of state, local, or foreign Tax Law) as a result of any such member being or having been a member of a Prior Group.

 

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(b) GRAIL Liability. GRAIL shall be liable for, and shall indemnify and hold harmless the Illumina Group from and against any liability for:

(i) Taxes that are allocated to GRAIL under this Section 2;

(ii) any Taxes resulting from a breach of any of GRAIL’s representations, warranties or covenants in this Agreement, the Separation Agreement or any Ancillary Agreement; and

(iii) any Specified Separation Taxes and Tax-Related Losses that are allocated to GRAIL under Section 6.05(a) of this Agreement.

Section 2.02. Allocation Principles. Except as otherwise provided in this Section 2 or in Section 6.05(a) of this Agreement, Taxes shall be allocated as follows:

(a) Allocation of Ordinary Taxes for Joint Returns. Illumina shall be allocated all Ordinary Taxes reported, or required to be reported, on any Joint Return for any taxable period.

(b) Allocation of Ordinary Taxes for Separate Returns.

(i) Illumina shall be allocated all Ordinary Taxes reported, or required to be reported, on an Illumina Separate Return for any taxable period.

(ii) GRAIL shall be allocated all Ordinary Taxes reported, or required to be reported, on a GRAIL Separate Return for any taxable period.

Section 2.03. Allocation Conventions.

(a) All Taxes allocated pursuant to Section 2.02 of this Agreement shall be allocated in accordance with the Closing of the Books Method.

(b) Any Tax Item of any member of the Illumina Group or GRAIL Group arising from a transaction engaged in outside of the ordinary course of business on the Distribution Date after the Effective Time shall be properly allocable to such member’s Group and any such transaction occurring after the Effective Time shall be treated for all Tax purposes (to the extent permitted by applicable Tax Law) as occurring at the beginning of the day following the Distribution Date in accordance with the principles of Treasury Regulation § 1.1502-76(b) or any similar provisions of state, local or foreign Law.

 

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Section 3. Preparation and Filing of Tax Returns.

Section 3.01. Illumina Separate Returns and Joint Returns.

(a) Illumina shall prepare and file, or cause to be prepared and filed, all Joint Returns and Illumina Separate Returns, and each member of the GRAIL Group to which any such Joint Return relates shall execute and file such consents, elections and other documents as Illumina may determine, after consulting with GRAIL in good faith, are required or appropriate, or otherwise requested by Illumina in connection with the filing of such Joint Return. GRAIL will elect and join, and will cause its respective Affiliates to elect and join, in filing any Joint Returns that Illumina determines are required to be filed or that Illumina elects to file, in each case pursuant to this Section 3.01(a). With respect to any Joint Return or Illumina Separate Return that could reasonably be expected to adversely affect any member of the GRAIL Group, Illumina shall submit a draft of such Tax Return to GRAIL at least thirty (30) days prior to the due date for the filing of such Tax Return (taking into account any applicable extensions), GRAIL shall have the right to review such Tax Return and to submit to Illumina any reasonable changes to such Tax Return no later than fifteen (15) days prior to the due date for the filing of such Tax Return (taking into account any applicable extensions). The Parties agree to consult and to attempt to resolve in good faith any issues arising as a result of the review of any such Tax Return; provided, however, that nothing in this Section 3.01 shall prevent Illumina from timely filing (or causing to be timely filed) such Tax Return.

(b) The Parties and their respective Affiliates shall elect to close the Tax Period of each member of the GRAIL Group on the Distribution Date, to the extent permitted by applicable Tax Law.

Section 3.02. GRAIL Separate Returns. GRAIL shall prepare and file (or cause to be prepared and filed) all GRAIL Separate Returns. With respect to any GRAIL Separate Return that could reasonably be expected to adversely affect any member of the Illumina Group, GRAIL shall submit a draft of such Tax Return to Illumina at least thirty (30) days prior to the due date for the filing of such Tax Return (taking into account any applicable extensions), Illumina shall have the right to review such Tax Return and to submit to GRAIL any reasonable changes to such Tax Return no later than fifteen (15) days prior to the due date for the filing of such Tax Return (taking into account any applicable extensions). The Parties agree to consult and to attempt to resolve in good faith any issues arising as a result of the review of any such Tax Return; provided, however, that nothing in this Section 3.02 shall prevent GRAIL from timely filing (or causing to be timely filed) such Tax Return.

Section 3.03. Tax Reporting Consistent with Intended Tax Treatment. The Parties shall prepare all Tax Returns consistent with the Intended Tax Treatment unless, and then only to the extent, required pursuant to a Final Determination.

Section 3.04. Protective Section 336(e) Elections.

(a) General. The Parties hereby agree that, if Illumina shall determine in its sole discretion, prior to the applicable due dates of such elections, that the Parties should make a protective election under Section 336(e) of the Code (and any similar provision of applicable state or local Tax Law) with respect to the Distribution for GRAIL (the “Protective Section 336(e) Election”), then the Parties shall enter into a written, binding agreement to make the Protective Section 336(e) Election, and the Parties shall timely make the Protective Section 336(e) Election in accordance with Treasury Regulations § 1.336-2(h). For the avoidance of doubt, such agreement is intended to constitute a written, binding agreement to make the Protective Section 336(e) Election within the meaning of Treasury Regulations § 1.336-2(h)(1)(i).

 

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(b) Cooperation and Reporting. Illumina and GRAIL shall cooperate in making the Protective Section 336(e) Election, if any, including filing any statements, amending any Tax Returns or undertaking such other actions reasonably necessary to carry out the Protective Section 336(e) Election. Illumina shall determine the “Aggregate Deemed Asset Disposition Price” and the “Adjusted Grossed-Up Basis” (each as defined under applicable Treasury Regulations) and the allocation of such Aggregate Deemed Asset Disposition Price and Adjusted Grossed-Up Basis among the disposition date assets of the applicable member or members of the Illumina Group or GRAIL Group, each in accordance with the applicable provisions of Section 336(e) of the Code and applicable Treasury Regulations (the “Section 336(e) Allocation Statement”). Illumina shall submit a draft of the Section 336(e) Allocation Statement to GRAIL and accept any reasonable changes thereto requested by GRAIL no later than sixty (60) days following GRAIL’s receipt of such draft. Each Party agrees not to take any position (and to cause each of its Affiliates not to take any position) that is inconsistent with the Protective Section 336(e) Election, including the Section 336(e) Allocation Statement, on any Tax Return, in connection with any Tax Contest or for any other Tax purposes (in each case, excluding any position taken for financial accounting purposes), except as required by a Final Determination.

(c) Tax Benefit Payments by GRAIL. In the event that the Distribution fails to qualify for its Intended Tax Treatment and Illumina is not entitled to indemnification for one hundred percent (100%) of any Specified Separation Taxes and Tax-Related Losses relating to the Distribution arising from such failure, Illumina shall be entitled to quarterly payments from GRAIL equal to the Section 336(e) Tax Benefit Percentage of the actual Tax savings if, as and when realized by the GRAIL Group arising from the step up in Tax basis (including, for the avoidance of doubt, any such step up attributable to payments made pursuant to this Section 3.04(c)) resulting from the Protective Section 336(e) Election in the Tax Period in which such step up in Tax basis is depreciated, amortized or used to reduce taxable income or gain on a disposition, determined on a “with and without” basis (treating any deductions or amortization attributable to the step up in Tax basis resulting from the Protective 336(e) Election, or any other recovery of such step up, as the last items claimed for any taxable year), including after the utilization of any available net operating loss carryforwards; provided, however, that such payments: (i) shall be reduced by all reasonable costs incurred by any member of the GRAIL Group to amend any Tax Returns or other governmental filings related to such Protective Section 336(e) Election and (ii) shall not exceed the amount of any Specified Separation Taxes and Tax-Related Losses relating to the Distribution incurred by the Illumina Group (not taking into account this Section 3.04(c)) as a result of such failure for which Illumina is not entitled to indemnification under this Agreement.

Section 3.05. GRAIL Carrybacks and Claims for Refund.

(a) GRAIL hereby agrees that, unless Illumina consents in writing (which consent may not be unreasonably withheld, conditioned, or delayed) or as required by Law, no member of the GRAIL Group (nor its successors) shall file any Adjustment Request with respect to any Tax Return that could affect any Joint Return or any other Tax Return reflecting Taxes for which Illumina could reasonably be expected to be responsible under Section 2.

 

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(b) Illumina hereby agrees that, unless GRAIL consents in writing (which consent may not be unreasonably withheld, conditioned, or delayed) or as required by Law, no member of the Illumina Group shall file any Adjustment Request with respect to any GRAIL Separate Return.

Section 3.06. Apportionment of Tax Attributes. Tax Attributes arising in a Pre-Distribution Period will be allocated to (and the benefits and burdens of such Tax Attributes will inure to) the members of the Illumina Group and the members of the GRAIL Group in accordance with the Code, Treasury Regulations, and any other applicable Tax Law.

Section 4. Tax Payments.

Section 4.01. Taxes Shown on Tax Returns. Illumina shall pay (or cause to be paid) to the proper Tax Authority the Tax shown as due on any Tax Return that a member of the Illumina Group is responsible for preparing under Section 3 of this Agreement, and GRAIL shall pay (or cause to be paid) to the proper Tax Authority the Tax shown as due on any Tax Return that a member of the GRAIL Group is responsible for preparing under Section 3 of this Agreement.

Section 4.02. Adjustments Resulting in Underpayments. In the case of any adjustment pursuant to a Final Determination with respect to any Tax, the Party to which such Tax is allocated pursuant to this Agreement shall pay to the applicable Tax Authority when due any additional Tax required to be paid as a result of such adjustment.

Section 4.03. Indemnification Payments.

(a) If any Party (the “Payor”) is required under applicable Tax Law to pay to a Tax Authority a Tax that another Party (the “Required Party”) is liable for under this Agreement, including in the case of any adjustment pursuant to a Final Determination with respect to any Tax, the Required Party shall reimburse the Payor within ten (10) Business Days of delivery by the Payor to the Required Party of an invoice for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. Except as otherwise provided in the following sentence, the Required Party shall also pay to the Payor any reasonable third-party costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses) within ten (10) Business Days after the Payor’s written demand therefor, accompanied by evidence of payment and a statement detailing the amounts paid and describing in reasonable detail the particulars relating thereto. If and to the extent any Specified Separation Taxes are determined regarding the failure of the Intended Tax Treatment, the Party allocated responsibility for Tax-Related Losses associated with such Specified Separation Taxes under Section 2.01 of this Agreement shall pay such Tax-Related Losses to Illumina (if such responsible Party is GRAIL) or GRAIL (if such responsible Party is Illumina) within ten (10) Business Days after written demand therefor, accompanied by evidence of payment and a statement detailing the amounts paid and describing

 

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in reasonable detail the particulars relating thereto. Notwithstanding the foregoing, if Illumina or GRAIL disputes in good faith the fact or the amount of its obligation hereunder, then no payment of the amount in dispute shall be required until any such good faith dispute is resolved; provided, however, that any amount not paid by the due date otherwise provided in this Section 4 shall bear interest from such due date computed at the Interest Rate with respect to such due date or the maximum rate permitted by Law, whichever is less.

(b) All indemnification payments under this Agreement shall be made by Illumina directly to GRAIL and by GRAIL directly to Illumina; provided, however, that if the Parties mutually agree for administrative convenience with respect to any such indemnification payment, any member of the Illumina Group, on the one hand, may make such indemnification payment to any member of the GRAIL Group, on the other hand, and vice versa.

Section 5. Tax Refunds. Illumina shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Taxes for which Illumina is liable hereunder and any other payment from a Tax Authority in respect of a Tax Return that Illumina is required to file under Section 3.01, and GRAIL shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Taxes for which GRAIL is liable hereunder and any other payment from a Tax Authority in respect of a Tax Return that GRAIL is required to file under Section 3.02; provided, however, that if a Party that receives a refund or other amount pays over to the other Party such refund or other amount in accordance with this Section 5, the Party entitled to such refund or other amount shall, upon request of the Party that received such refund or other amount, repay such refund or other amount to the Party that received such refund or other amount in the event that the Party that received such refund or other amount is required to repay such refund or other amount to the applicable Tax Authority.

Section 6. Intended Tax Treatment.

Section 6.01. Restrictions on Members of the GRAIL Group.

(a) GRAIL will not, and will not permit any other member of the GRAIL Group to, take or fail to take, as applicable, (i) any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in the Tax Materials or (ii) any action where such action or failure to act could reasonably be expected to adversely affect any Intended Tax Treatment.

(b) GRAIL and each other member of the GRAIL Group agrees that, from the Distribution Date until the first Business Day after the two-year anniversary of the Distribution Date:

(i) GRAIL will continue and cause to be continued the GRAIL ATB by the GRAIL SAG;

 

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(ii) GRAIL will not enter into any Proposed Acquisition Transaction or, to the extent GRAIL or any other member of the GRAIL Group has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the General Corporation Law of the State of Delaware or any similar corporate statute, any “fair price” or other provision of the charter or bylaws of GRAIL, (D) amending its certificate of incorporation to declassify its board of directors or approving any such amendment or (E) otherwise);

(iii) GRAIL will not, nor will it agree to, merge, consolidate or amalgamate with any other Person, unless, in the case of a merger or consolidation, GRAIL is the survivor of the merger or consolidation;

(iv) GRAIL will not in a single transaction or series of transactions sell, transfer or otherwise dispose of (including any transaction treated for U.S. federal Income Tax purposes as a sale, transfer or disposition), or permit any other member of the GRAIL Group to sell, transfer or otherwise dispose of, thirty percent (30%) or more of the gross assets of the GRAIL ATB (such percentage to be measured based on fair market value as of the Distribution Date), in each case other than (A) sales, transfers or other dispositions of assets in the ordinary course of business, (B) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (C) any assets transferred to a Person that is disregarded as an entity separate from the transferor for U.S. federal Income Tax purposes, (D) any mandatory or optional repayment (or pre-payment) of any indebtedness of GRAIL or any member of the GRAIL Group or (E) any sales, transfers or other dispositions of assets within the GRAIL SAG;

(v) GRAIL will not redeem or otherwise repurchase (directly or through an Affiliate) any stock, or rights to acquire stock, of GRAIL, except (A) to the extent such repurchases are Specified Repurchases or Redemptions (without regard to the proviso in the definition of “Specified Repurchases or Redemptions”), provided that there is no plan or intention that the aggregate amount of stock repurchases will equal or exceed 20 percent of the outstanding stock of GRAIL, (B) to the extent reasonably necessary to pay the total tax liability arising from the vesting of a GRAIL Equity Award, or (C) through a net exercise of a GRAIL Equity Award;

(vi) GRAIL will not amend, or permit any other member of the GRAIL Group to amend, its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Capital Stock of GRAIL (including, without limitation, through the conversion of one class of Capital Stock of GRAIL into another class of Capital Stock of GRAIL); and

(vii) GRAIL will not take, or permit any other member of the GRAIL Group to take, any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Tax Materials) which in the aggregate (and taking into account any other transactions described in this subparagraph (b)) would reasonably be expected to result in a failure to preserve any Intended Tax Treatment;

 

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unless, in each case, prior to taking any such action set forth in the foregoing clauses (i) through (vii), (A) Illumina shall have obtained a Post-Distribution Ruling, (B) Illumina shall have obtained an Unqualified Tax Opinion in form and substance satisfactory to Illumina in its reasonable discretion or (C) Illumina shall have waived the requirement to obtain such Post-Distribution Ruling or Unqualified Tax Opinion. In determining whether any Post-Distribution Ruling or Unqualified Tax Opinion is in form and substance satisfactory to Illumina in its reasonable discretion, Illumina (I) may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations used as a basis for such Post-Distribution Ruling or Unqualified Tax Opinion and Illumina’s views on the substantive merits of the legal analysis contained therein, and (II) must exercise such discretion in good faith solely to preserve the Intended Tax Treatment.

Section 6.02. Restrictions on Members of the Illumina Group. Illumina will not, and will not permit any other member of the Illumina Group to, take or fail to take, as applicable, any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in the Tax Materials. Illumina agrees that it will not take or fail to take, or permit any member of the Illumina Group, as the case may be, to take or fail to take, any action where such action or failure to act could reasonably be expected to adversely affect any Intended Tax Treatment.

Section 6.03. Tax Opinions. The Parties shall use their best efforts to cause the Illumina Tax Opinion to be issued, including by executing any Representation Letters reasonably requested in connection with the Illumina Tax Opinion; provided, that each Party shall have been provided with a reasonable opportunity to review, comment and consent to the content of any Representation Letter to be executed by it (such consent not to be unreasonably withheld, conditioned or delayed).

Section 6.04. Procedures Regarding Opinions and Post-Distribution Rulings.

(a) If GRAIL notifies Illumina that it desires to take one of the actions described in Section 6.01(b) of this Agreement (a “Notified Action”), Illumina shall cooperate with GRAIL in good faith and use its commercially reasonable efforts to seek to obtain a Post-Distribution Ruling or Unqualified Tax Opinion for the purpose of permitting GRAIL to take the Notified Action unless Illumina shall have waived the requirement (in Illumina’s sole discretion) to obtain such Post-Distribution Ruling or Unqualified Tax Opinion. If such a Post-Distribution Ruling is to be sought, Illumina shall apply for such Post-Distribution Ruling, and Illumina and GRAIL shall jointly control the process of obtaining such Post-Distribution Ruling. In no event shall Illumina be required to file any request for a Post-Distribution Ruling under this Section 6.04(a) unless GRAIL represents that all information and representations, if any, relating to any member of the GRAIL Group, contained in such request documents are (subject to any qualifications therein) true, correct and complete and obtains certification from any counterparty

 

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to any Proposed Acquisition Transaction that all information and representations relating to such counterparty in such request documents are (subject to any qualifications therein) true, correct and complete. GRAIL shall reimburse Illumina for all reasonable costs and expenses incurred by the Illumina Group in connection with such cooperation within ten (10) Business Days after receiving an invoice from Illumina therefor, accompanied by evidence of payment and a statement detailing the amounts paid and describing in reasonable detail the particulars relating thereto.

(b) Illumina shall have the right to obtain a Post-Distribution Ruling or tax opinion at any time in its sole and absolute discretion. If Illumina determines to obtain such a Post-Distribution Ruling or tax opinion, Illumina shall have exclusive control over the process and GRAIL shall (and shall cause its Affiliates to) cooperate with Illumina and take any and all actions reasonably requested by Illumina in connection with obtaining the Post-Distribution Ruling or tax opinion (including, without limitation, by making any reasonable representation or covenant or providing any materials or information requested by the IRS or any Tax Advisor). Illumina shall reimburse GRAIL for all reasonable costs and expenses incurred by the GRAIL Group in connection with such cooperation within ten (10) Business Days after receiving an invoice from GRAIL therefor, accompanied by evidence of payment and a statement detailing the amounts paid and describing in reasonable detail the particulars relating thereto.

(c) Following the Effective Time, GRAIL shall not, nor shall GRAIL permit any of its Affiliates to, seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Separation (including the impact of any transaction on any Intended Tax Treatment) or a Pre-Distribution Period without obtaining Illumina’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed.

Section 6.05. Liability for Specified Separation Taxes and Tax-Related Losses.

(a) In the event that Specified Separation Taxes become due and payable to a Tax Authority pursuant to a Final Determination, then, notwithstanding anything to the contrary in this Agreement:

(i) if such Specified Separation Taxes are attributable to a GRAIL Disqualifying Act, then GRAIL shall be allocated such Specified Separation Taxes and corresponding Tax-Related Losses;

(ii) if such Specified Separation Taxes are attributable to an Illumina Disqualifying Act, then Illumina shall be allocated such Specified Separation Taxes and corresponding Tax-Related Losses;

(iii) if such Specified Separation Taxes are attributable to both a GRAIL Disqualifying Act and an Illumina Disqualifying Act, then such Specified Separation Taxes and corresponding Tax-Related Losses shall be allocated between Illumina and GRAIL in proportion to the relative contribution of the members of the Illumina Group, one the one hand, and the members of the GRAIL Group, on the other hand, to the circumstances giving rise to such Specified Separation Taxes; and

 

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(iv) if such Specified Separation Taxes are not attributable to either a GRAIL Disqualifying Act or an Illumina Disqualifying Act, then Illumina shall be allocated such Specified Separation Taxes and corresponding Tax-Related Losses.

(b) GRAIL shall pay Illumina the amount of any Specified Separation Taxes for which GRAIL is responsible under this Section 6.05 as a result of a Final Determination no later than two (2) Business Days after the date such Specified Separation Taxes are determined as a result of a Final Determination to be due.

Section 6.06. Planned Acquisitions. Illumina hereby represents and warrants to GRAIL that (i) the Planned Acquisitions have not and will not result in an acquisition of more than 27.6% of either the total combined value or voting power of all outstanding shares of Capital Stock of GRAIL determined as of the Distribution Date, and (ii) other than the Planned Acquisitions, there have not been any direct or indirect acquisitions of Capital Stock of GRAIL that may be treated as part of a “plan” or “series of related transactions” with the Distribution for purposes of Section 355(e) of the Code.

Section 7. Assistance and Cooperation.

Section 7.01. Assistance and Cooperation.

(a) The Parties shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, as reasonably requested in connection with Tax matters relating to the Parties and their Affiliates, including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to any other Party and its Affiliates reasonably available to such other Party as provided in Section 7 of this Agreement. Each of the Parties shall also make available to any other Party, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes.

(b) Any information or documents provided under this Agreement shall be kept confidential by the Party receiving the information or documents, except to the extent otherwise necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. In addition, in the event that Illumina determines that the provision of any information or documents to GRAIL or any GRAIL Affiliate, or GRAIL determines that the provision of any information or documents to Illumina or any Illumina Affiliate, could be commercially detrimental, violate any Law or agreement or waive any Privilege, the Parties shall use commercially reasonable efforts to permit each other’s compliance with its obligations under this Section 7 in a manner that avoids any such harm or consequence.

 

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(c) Tax Return Information. Each of Illumina and GRAIL, and each member of their respective Groups, acknowledges that time is of the essence in relation to any request for information, assistance or cooperation made pursuant to this Section 7. Each of Illumina and GRAIL, and each member of their respective Groups, acknowledges that failure to conform to the reasonable deadlines set by the Party making such request could cause irreparable harm. Each Party shall provide to the other Party information and documents relating to its Group reasonably required by the other Party to prepare Tax Returns, including any pro forma returns required by the Responsible Party for purposes of preparing such Tax Returns. Any information or documents the Responsible Party requires to prepare such Tax Returns shall be provided in such form as the Responsible Party reasonably requests and at or prior to the time reasonably specified by the Responsible Party so as to enable the Responsible Party to file such Tax Returns on a timely basis.

(d) Reliance by Illumina. If any member of the GRAIL Group supplies information to a member of the Illumina Group in connection with a Tax liability and an officer of a member of the Illumina Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Illumina Group identifying the information being so relied upon, the chief financial officer of GRAIL (or any officer of GRAIL as designated by the chief financial officer of GRAIL) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. GRAIL agrees to indemnify and hold harmless each member of the Illumina Group and its directors, officers and employees from and against any fine, penalty or other cost or expense of any kind attributable to a member of the GRAIL Group having supplied, pursuant to this Section 7, a member of the Illumina Group with inaccurate or incomplete information in connection with a Tax liability.

(e) Reliance by GRAIL. If any member of the Illumina Group supplies information to a member of the GRAIL Group in connection with a Tax liability and an officer of a member of the GRAIL Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the GRAIL Group identifying the information being so relied upon, the chief financial officer of Illumina (or any officer of Illumina as designated by the chief financial officer of Illumina) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete. Illumina agrees to indemnify and hold harmless each member of the GRAIL Group and its directors, officers and employees from and against any fine, penalty or other cost or expense of any kind attributable to a member of the Illumina Group having supplied, pursuant to this Section 7, a member of the GRAIL Group with inaccurate or incomplete information in connection with a Tax liability.

 

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Section 8. Tax Records.

Section 8.01. Retention of Tax Records. Each of Illumina and GRAIL shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Distribution Periods, and Illumina shall preserve and keep all other Tax Records relating to Taxes of the Illumina and GRAIL Groups for Pre-Distribution Periods, for so long as the contents thereof may be or become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitations, or (ii) seven (7) years after the Distribution Date (such later date, the “Retention Date”). After the Retention Date, each of Illumina and GRAIL may dispose of such Tax Records at any time prior to receiving written notice from the other Party that such other Party will take possession of such Tax Records. If, prior to the Retention Date, (a) Illumina or GRAIL reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law, then such first Party may dispose of such Tax Records upon sixty (60) Business Days’ prior notice to the other Party unless such Party receives prior written notice from such other Party that it will take possession of such Tax Records. Any notice of an intent to dispose given pursuant to this Section 8.01 shall include a list of the Tax Records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed. A Party providing timely written notice that it intends to take possession of Tax Records pursuant to this Section 8.01 shall have the opportunity, at its cost and expense, to copy or remove, within sixty (60) Business Days of providing such notification, all or any part of such Tax Records. If, at any time prior to the Retention Date, a Party or any of its Affiliates determines to decommission or otherwise discontinue any computer program or information technology system used to access or store any Tax Records, then such program or system may be decommissioned or discontinued upon ninety (90) Business Days’ prior notice to the other Party and the other Party shall have the opportunity, at its cost and expense, to copy, within such ninety (90) Business Day period, all or any part of the underlying data relating to the Tax Records accessed by or stored on such program or system.

Section 8.02. Access to Tax Records. The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession pertaining to (i) in the case of any Tax Return of the Illumina Group, the portion of such return that relates to Taxes for which the GRAIL Group may be liable pursuant to this Agreement, if any, or (ii) in the case of any Tax Return of the GRAIL Group, the portion of such return that relates to Taxes for which the Illumina Group may be liable pursuant to this Agreement, if any, and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Tax Authority or other Tax auditor direct access, at the cost and expense of the requesting Party, during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement.

Section 8.03. Preservation of Privilege. The Parties and their respective Affiliates shall not provide access to, copies of, or otherwise disclose to any Person any documentation relating to Taxes existing prior to the Distribution Date to which Privilege may reasonably be asserted without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed.

 

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Section 9. Tax Contests.

Section 9.01. Notice. Each Party shall provide prompt notice to the other Party of any written communication from a Tax Authority regarding any pending Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware (i) related to Taxes for Tax Periods for which the other Party may reasonably be expected to be required to indemnify the receiving Party hereunder or for which the receiving Party may be required to indemnify the other Party hereunder, (ii) relating to a GRAIL Separate Return that could reasonably be expected to materially adversely affect any member of the Illumina Group or (iii) otherwise relating to the Intended Tax Treatment or the Separation (including the resolution of any Tax Contest relating thereto). Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters. A failure by an indemnified Party to give notice as provided in this Section 9.01 shall not relieve the indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party is actually prejudiced by such failure.

Section 9.02. Control of Tax Contests.

(a) Illumina Control. Notwithstanding anything in this Agreement to the contrary, Illumina shall have the exclusive right to control any Tax Contest with respect to any Tax matters relating to (i) a Joint Return, (ii) an Illumina Separate Return, (iii) Specified Separation Taxes and (iv) Other Separation Taxes. Subject to Section 9.02(c) and Section 9.02(d), Illumina shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any such Tax Contest.

(b) GRAIL Control. Except as otherwise provided in this Section 9.02, GRAIL shall have the right to control any Tax Contest with respect to any Tax matters relating to any GRAIL Separate Return. Subject to Section 9.02(c) and Section 9.02(d) of this Agreement, GRAIL shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any such Tax Contest.

(c) Settlement Rights. The Controlling Party shall have the sole right to contest, litigate, compromise and settle any Tax Contest without obtaining the prior consent of the Non-Controlling Party; provided, that to the extent any such Tax Contest (i) could reasonably be expected to give rise to a claim for indemnity by the Controlling Party or its Affiliates against the Non-Controlling Party or its Affiliates under this Agreement, or (ii) could reasonably be expected to materially adversely affect any member of the other Party’s Group, then the Controlling Party shall not settle any such Tax Contest without the Non-Controlling Party’s prior written consent (which consent may not be unreasonably withheld, conditioned, or delayed). Subject to Section 9.02(e) of this Agreement, and unless waived by the Parties in writing, in

 

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connection with any potential adjustment in a Tax Contest as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (I) the Controlling Party shall keep the Non-Controlling Party reasonably informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (II) the Controlling Party shall timely provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (III) the Controlling Party shall timely provide the Non-Controlling Party with copies of the relevant portions of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest; (IV) the Controlling Party shall consult with the Non-Controlling Party and offer the Non-Controlling Party a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest; and (V) the Controlling Party shall defend such Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability or obligation that it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually and materially harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party. In the case of any Tax Contest described in this Section 9, “Controlling Party” means the Party entitled to control the Tax Contest under such Section and “Non-Controlling Party” means (x) Illumina if GRAIL is the Controlling Party and (y) GRAIL if Illumina is the Controlling Party.

(d) Tax Contest Participation. Subject to Section 9.02(e) of this Agreement, and unless waived by the Parties in writing, the Controlling Party shall provide the Non-Controlling Party with written notice reasonably in advance of, and the Non-Controlling Party shall have the right to attend, any formally scheduled meetings with Tax Authorities or hearings or proceedings before any judicial authorities in connection with any potential adjustment in a Tax Contest (i) pursuant to which the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement or (ii) that is with respect to a GRAIL Separate Return that could reasonably be expected to materially adversely affect any member of the Illumina Group. The failure of the Controlling Party to provide any notice specified in this Section 9.02(d) to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.

(e) Joint Returns. Notwithstanding anything in this Section 9 to the contrary, in the case of a Tax Contest related to a Joint Return, the rights of GRAIL and its Affiliates under Section 9.02(c) and Section 9.02(d) of this Agreement shall be limited in scope to the portion of such Tax Contest relating to Taxes for which GRAIL may reasonably be expected to become liable to make any indemnification payment to Illumina under this Agreement.

 

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(f) Power of Attorney. Each member of the GRAIL Group shall execute and deliver to Illumina (or such member of the Illumina Group as Illumina shall designate) any power of attorney or other similar document reasonably requested by Illumina (or such designee) in connection with any Tax Contest (as to which Illumina is the Controlling Party) described in this Section 9. Each member of the Illumina Group shall execute and deliver to GRAIL (or such member of the GRAIL Group as GRAIL shall designate) any power of attorney or other similar document reasonably requested by GRAIL (or such designee) in connection with any Tax Contest (as to which GRAIL is the Controlling Party) described in this Section 9.

Section 10. Survival of Obligations. The representations, warranties, covenants and agreements set forth in this Agreement shall be unconditional and absolute and shall remain in effect without limitation as to time.

Section 11. Tax Treatment of Payments.

Section 11.01. General Rule. Unless otherwise required by a Final Determination, the Parties will treat any payment made pursuant to Section 3.2 of the Separation Agreement or any indemnity payment made pursuant to this Agreement, the Separation Agreement or any Ancillary Agreement as an adjustment to the Disposal Funding contributed in the Contribution (and with respect to aggregate amounts in excess of the Disposal Funding, if any, a non-taxable distribution) or a capital contribution, as the case may be, made immediately prior to the Distribution; provided, however, that any such payment that is made or received by a Person other than Illumina or GRAIL, as the case may be, shall be treated as if made or received by the payor or the recipient as agent for Illumina or GRAIL, in each case as appropriate.

Section 11.02. Interest. Notwithstanding anything in Section 12 or otherwise herein or in the Separation Agreement to the contrary, to the extent one Party makes a payment of interest to the other Party under this Agreement with respect to the period from the date that the Party receiving the interest payment made a payment of Tax to a Tax Authority to the date that the Party making the interest payment reimbursed the Party receiving the interest payment for such Tax payment, (I) the interest payment shall be treated as interest expense to the Party making such payment (deductible to the extent provided by Law) and as interest income by the Party receiving such payment (includible in income to the extent provided by Law) and (II) the amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Party making such payment or increase in Tax to the Party receiving such payment.

Section 12. Indemnification Payments. Any indemnity payment made under this Agreement, the Separation Agreement or any Ancillary Agreement that is not governed by Section 3.04(c) shall be (i) increased as necessary so that after making all payments in respect to Taxes imposed on or attributable to such indemnity payment, the recipient Party receives an amount equal to the sum it would have received had no such Taxes been imposed, and (ii) reduced to take into account any Tax Benefit actually realized by the indemnified Party resulting from the incurrence of the liability, obligation, loss or payment in respect of which the indemnity payment is made.

 

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Section 13. General Provisions.

Section 13.01. Complete Agreement. This Agreement, the Separation Agreement, the Ancillary Agreements and the exhibits, annexes and schedules hereto and thereto, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties with respect to such subject matter other than those set forth or referred to herein or therein.

Section 13.02. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to each other Party. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile, electronic mail (including .pdf, docusign or other electronic signature) or other transmission method shall be deemed to have been duly and validly delivered and shall be sufficient to bind the parties to the terms and conditions of this Agreement.

Section 13.03. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by email with receipt confirmed, or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 13.03):

If to Illumina, to:

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attention: Scott Kreil

Email: skreil@illumina.com

 

24

with a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Two Manhattan West

375 Ninth Avenue

New York, NY 10001

Attention: Ronald E. Creamer Jr.

Email: rcreamer@cravath.com

If to GRAIL, to:

GRAIL, LLC

1525 O’Brien Drive

Menlo Park, California 94025

 

Attention:

Bob Ragusa

 

Aaron Freidin

 

Abram Barth

 

Don Lang

 

Email:

bragusa@grailbio.com

 

afreidin@grailbio.com

 

abarth@grailbio.com

 

dlang@grailbio.com

with a copy (which shall not constitute notice) to:

Latham & Watkins LLP

355 South Grand Avenue, Suite 100

Los Angeles, CA 90071

 

Attention:

W. Alex Voxman

 

Andrew Clark

 

Ross McAloon

 

Alexa Berlin

 

Email:

alex.voxman@lw.com

 

andrew.clark@lw.com

 

ross.mcaloon@lw.com

 

alexa.berlin@lw.com

Any Party may, by notice to the other Party, change the address and contact person to which any such notices are to be given.

Section 13.04. Waivers of Default. Waiver by a Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party. No failure or delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

 

25

Section 13.05. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it sought to enforce such waiver, amendment, supplement or modification is sought to be enforced.

Section 13.06. Assignability. This Agreement shall be binding upon and inure to the benefit of the other Party or the other parties hereto and thereto, respectively, and their respective successors and permitted assigns; provided, however, that no Party or party hereto may assign its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other Party or other parties thereto, as applicable. Notwithstanding the foregoing, no such consent shall be required for the assignment of a party’s rights and obligations under this Agreement in whole in connection with a change of control of a Party so long as the resulting, surviving or transferee Person assumes all the obligations of the relevant party thereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party. Nothing herein is intended to, or shall be construed to, prohibit either Party or any member of its Group from being party to or undertaking a change of control.

Section 13.07. Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any entity that is a Subsidiary of such Party after the Effective Time.

Section 13.08. Headings. The article, section and paragraph headings and the table of contents contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 13.09. Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to contracts made and to be performed in the state of Delaware.

Section 13.10. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY AGREEMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO OR ARISING FROM THIS AGREEMENT AND ANY OF THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.10.

 

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Section 13.11. Specific Performance. Subject to Section 9.2 of the Separation Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

Section 13.12. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

Section 13.13. Payment Terms.

(a) Except as otherwise expressly provided to the contrary in this Agreement, any amount to be paid or reimbursed by a Party (where applicable, or a member of such Party’s Group) to the other Party (where applicable, or a member of such other Party’s Group) under this Agreement shall be paid or reimbursed hereunder within thirty (30) Business Days after presentation of an invoice or a written demand therefor, in either case setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b) Except as expressly provided to the contrary in this Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within thirty (30) Business Days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Interest Rate with respect to the due date of such payment or the maximum rate permitted by Law, whichever is less, calculated for the actual number of days elapsed, accrued from the date on which such payment was due up to the date of the actual receipt of payment.

 

27

(c) Without the consent of the Party receiving any payment under this Agreement specifying otherwise, all payments to be made by either Illumina or GRAIL under this Agreement shall be made in U.S. dollars. Except as expressly provided herein, any amount which is not expressed in U.S. dollars shall be converted into U.S. dollars by using the exchange rate published on Bloomberg at 5:00 pm, Eastern time, on the day before the relevant date, or in The Wall Street Journal on such date if not so published on Bloomberg. Except as expressly provided herein, in the event that any Tax indemnity payment required to be made hereunder may be denominated in a currency other than U.S. dollars, the amount of such payment shall be converted into U.S. dollars on the date in which notice of the claim is given to the indemnifying Party.

Section 13.14. No Admission of Liability. The allocation of assets and liabilities herein is solely for the purpose of allocating such assets and liabilities between Illumina and GRAIL and is not intended as an admission of liability or responsibility for any alleged liabilities vis-à -vis any Third Party, including with respect to the liabilities of any non-wholly owned subsidiary of Illumina or GRAIL.

[Signature Page Follows]

 

28

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

[Signature Page to Tax Matters Agreement]

 

29

Appendix A

Intended Tax Treatment

“Intended Tax Treatment” means the following U.S. federal income Tax consequences in connection with the Contribution, the Distribution, and certain related transactions:

 

a)

the qualification of the Contribution and Distribution, taken together, as a “reorganization” under Section 355(a) and 368(a)(1)(D) of the Code;

 

b)

the qualification of the Distribution as a transaction in which the GRAIL Capital Stock distributed to holders of Illumina Capital Stock is “qualified property” for purposes of Sections 355 and 361(a) of the Code (and neither Section 355(d) nor Section 355(e) of the Code causes such GRAIL Capital Stock to be treated as other than “qualified property” for such purposes);

 

c)

the nonrecognition of income, gain, or loss by Illumina or GRAIL on the Contribution and the Distribution under Sections 355, 361, and/or 1032 of the Code, as applicable;

 

d)

the nonrecognition of income, gain, or loss by holder of Illumina Capital Stock upon the receipt of GRAIL Capital Stock in the Distribution (except with respect of cash in lieu of fractional shares of GRAIL Capital Stock, if any) under Section 355 of the Code.

 

30

Appendix B

GRAIL ATB

“GRAIL ATB” means the multi-cancer early detection testing business conducted by GRAIL, LLC and GRAIL UK immediately before the Distribution and since at least August 18, 2021, the date upon which Illumina completed its acquisition of GRAIL, LLC. The GRAIL ATB includes the business of developing, manufacturing, marketing and selling, distributing, and performing Galleri-branded multi-cancer early detection tests.

 

31

Exhibit 10.2

EMPLOYEE MATTERS AGREEMENT

by and between

ILLUMINA, INC.

and

GRAIL, LLC

(to be converted into GRAIL, INC.)

Dated as of June 21, 2024

TABLE OF CONTENTS

 

				Page
ARTICLE I
Definitions and Interpretation
Section 1.1.		General			1
Section 1.2.		References; Interpretation			5
ARTICLE II
General Principles
Section 2.1.		Nature of Liabilities			5
Section 2.2.		Assumption and Retention of Liabilities Generally			5
Section 2.3.		Collective Bargaining Agreements			6
Section 2.4.		Information and Consultation			6
Section 2.5.		Non-Acceleration; Non-Termination of Employment			7
Section 2.6.		No Transfer of Assets			7
ARTICLE III
Equity Incentive Awards
Section 3.1.		GRAIL Stock Plan			7
Section 3.2.		GRAIL LTIP Award Valuation			7
Section 3.3.		Illumina RSU Conversion			8
Section 3.4.		GRAIL RSU Conversion			8
Section 3.5.		Option Awards			9
Section 3.6.		Miscellaneous			9
ARTICLE IV
Non-Qualified Deferred Compensation
Section 4.1.		Treatment of Illumina Non-Qualified Plans			9
Section 4.2.		No Separation from Service			10
ARTICLE V
Additional Matters
Section 5.1.		Code Section 409A			10
Section 5.2.		Confidentiality			10
Section 5.3.		Tax Deductions			10

 

-i-

ARTICLE VI
General And Administrative
Section 6.1.		Employer Rights			10
Section 6.2.		Effect on Employment			10
Section 6.3.		Consent of Third Parties			11
Section 6.4.		Access to Employees			11
Section 6.5.		Beneficiary Designation/Release of Information/Right to Reimbursement			11
Section 6.6.		No Third Party Beneficiaries			11
Section 6.7.		No Acceleration of Benefits			11
Section 6.8.		Employee Benefits Administration			12
ARTICLE VII
Miscellaneous
Section 7.1.		Entire Agreement; Power			12
Section 7.2.		Counterparts			12
Section 7.3.		Notices			13
Section 7.4.		Waivers			14
Section 7.5.		Specific Performance			14
Section 7.6.		Assignment			15
Section 7.7.		Successors and Assigns			15
Section 7.8.		Amendments			15
Section 7.9.		Subsidiaries			15
Section 7.10.		Governing Law			15
Section 7.11.		Interpretation			15
Section 7.12.		No Duplication; No Double Recovery			16
Section 7.13.		No Waiver			16
Section 7.14.		No Admission of Liability			16
Section 7.15.		Incorporation by Reference			16

 

-ii-

FORM OF

EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”), is entered into as of June 21, 2024 by and between Illumina, Inc., a Delaware corporation (“Illumina”), and GRAIL, LLC, a wholly owned subsidiary of Illumina and a Delaware limited liability company (“GRAIL LLC”), to be converted to a corporation and renamed GRAIL, Inc. prior to the Distribution (“GRAIL”). Illumina and GRAIL are each a “Party” and are sometimes referred to herein collectively as the “Parties”.

W I T N E S S E T H:

WHEREAS, Illumina, acting together with its Subsidiaries, currently conducts the Illumina Business and GRAIL, acting together with its Subsidiaries, currently conducts the GRAIL Business;

WHEREAS, Illumina and GRAIL have entered into a Separation and Distribution Agreement, dated as of June 21, 2024 (the “Separation Agreement”), pursuant to which the Separation will be consummated;

WHEREAS, pursuant to the Separation Agreement, Illumina and GRAIL have agreed to enter into this Agreement for the purpose of allocating between them Assets, Liabilities and responsibilities with respect to certain employee matters and employee compensation and benefit plans and programs and to address certain other employment-related matters.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements, provisions and covenants contained in this Agreement, the Parties hereby agree as follows:

ARTICLE I

Definitions and Interpretation

Section 1.1. General. As used in this Agreement, the following terms shall have the following meanings. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Separation Agreement, unless otherwise indicated.

“2024 Cash-Based Incentive Award Agreement” means each award agreement evidencing a grant of a GRAIL 2024 Cash-Based Incentive Award.

“Aggregate Award Value” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“Agreement” shall have the meaning set forth in the Preamble.

“Baseline Equity Value” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“Benefit Arrangement” shall mean any compensation or employee benefit plan, program, policy, agreement or other arrangement, whether or not an “employee benefit plan” (within the meaning of Section 3(3) of ERISA, and whether or not subject to ERISA), including any Welfare Plan and any other compensation or benefit plan, program, policy, agreement or arrangement providing cash- or equity-based compensation or incentives, vacation, paid or unpaid leave, severance, retention, change in control, termination, deferred compensation, individual employment or consulting, supplemental income, retirement, post-retirement or other fringe compensation or benefits (whether or not taxable) or employee loans, but excluding workers’ compensation plans, programs, policies, agreements and arrangements.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collective Bargaining Agreement” shall mean all agreements with the collective bargaining representatives, employee representatives, trade unions, labor or management organizations, groups of employees, or works councils or similar representative bodies of GRAIL Employees, including all national or sector specific collective agreements which are applicable to GRAIL Employees, in each case in effect immediately prior to the Effective Time, that set forth terms and conditions of employment of GRAIL Employees, and all modifications of, or amendments to, such agreements and any rules, procedures, awards or decisions of competent jurisdiction interpreting or applying such agreements.

“Converted GRAIL Awards” shall mean the Converted GRAIL RSUs, the Converted GRAIL 2024 Cash-Based Incentive Awards and the Converted GRAIL Options.

“Employee Representative” shall mean any works council, employee representative, trade union, labor or management organization, group of employees or similar representative body for GRAIL Employees.

“Equity Value” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“Equity Value Percentage Change” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“GRAIL 2024 Cash-Based Incentive Award” means each cash-based incentive award granted by any member of the GRAIL Group on or after March 31, 2024, as agreed between Illumina and GRAIL, which for the avoidance of doubt, shall not include any award identified as an “equity appreciation award”.

 

2

“GRAIL Benefit Arrangement” shall mean any Benefit Arrangement that is (a) sponsored, maintained or contributed to, or required to be sponsored, maintained or contributed to, by any member of the GRAIL Group, excluding any Benefit Arrangement that is sponsored or maintained by a member of the Illumina Group, or (b) an Individual Agreement to which a member of the GRAIL Group is a party (including for clarity, each GRAIL LTIP Award and each GRAIL 2024 Cash-Based Incentive Award).

“GRAIL Conversion Price” shall mean the average of the volume weighted average per share price of GRAIL Stock on the first four trading days immediately following the Distribution Date, as reported by Bloomberg L.P.

“GRAIL RSU Conversion Ratio” shall mean the Illumina RSU Conversion Price divided by the GRAIL Conversion Price.

“GRAIL Employee” shall mean each individual who is employed by a member of the GRAIL Group as of immediately prior to the Effective Time, regardless of whether any such employee is actively at work or is not actively at work as a result of disability or illness, a leave of absence (including military leave with unemployment rights under federal Law and leave under the Family and Medical Leave Act of 1993), vacation, personal day or similar short- or long-term absence.

“GRAIL Former Employee” means each individual who, as of immediately prior to the Effective Time, is not an employee of a member of the GRAIL Group or a member of the Illumina Group, but who was previously employed by a member of the GRAIL Group.

“GRAIL LTIP Award” means each cash-based equity appreciation award granted by any member of the GRAIL Group.

“GRAIL Option Conversion Ratio” shall mean the Illumina Option Conversion Price divided by the GRAIL Conversion Price.

“Grant Date” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“Illumina” shall have the meaning set forth in the Preamble.

“Illumina Benefit Arrangement” shall mean any Benefit Arrangement that is (a) sponsored, maintained or contributed to, or required to be sponsored, maintained or contributed to, by any member of the Illumina Group, in each case, excluding any Benefit Arrangement that is sponsored or maintained by a member of the GRAIL Group or (b) an Individual Agreement to which a member of the Illumina Group is a party.

“Illumina Employee” shall mean each individual who is employed by a member of the Illumina Group as of immediately prior to the Effective Time, regardless of whether any such employee is actively at work or is not actively at work as a result of disability or illness, a leave of absence (including military leave with unemployment rights under federal Law and leave under the Family and Medical Leave Act of 1993), vacation, personal day or similar short- or long-term absence.

 

3

“Illumina Former Employee” means each individual who, as of immediately prior to the Effective Time, is not an employee of a member of the GRAIL Group or a member of the Illumina Group, but who was previously employed by a member of the Illumina Group.

“Illumina LTIP” shall mean the Illumina, Inc. Amended and Restated 2015 Stock and Incentive Plan or any prior version of such equity plan in existence at the time the applicable GRAIL LTIP Award was granted.

“Illumina Non-Qualified Plan” shall mean each nonqualified deferred compensation plan or arrangement, including any such plan that is an excess defined benefit or defined contribution plan, that is an Illumina Benefit Arrangement.

“Illumina Option Award” shall mean an option to purchase shares of Illumina Stock granted under the Illumina LTIP.

“Illumina Option Conversion Price” shall mean the average of the volume weighted average per share price of Illumina Stock trading “regular way with due bills” during the four trading days immediately preceding the Distribution Date, as reported by Bloomberg L.P.

“Illumina RSU Conversion Price” shall mean the closing price of Illumina Stock on the date of the Illumina RSU Conversion.

“Individual Agreement” shall mean a Benefit Arrangement that is an individual employment contract or other similar agreement between, on the one hand, any member of the Illumina Group or any member of the GRAIL Group and, on the other hand, any Illumina Employee, Illumina Former Employe, GRAIL Employee, or GRAIL Former Employee.

“LTIP Award Agreement” means each award agreement evidencing a GRAIL LTIP Award grant.

“Quarterly Measurement Date” shall have the meaning ascribed to it in the applicable LTIP Award Agreement.

“Party” and “Parties” shall have the meanings set forth in the Preamble.

“Separation” shall have the meaning set forth in the Recitals.

“Separation Agreement” shall have the meaning set forth in the Recitals.

“Welfare Plan” shall mean, where applicable, a “welfare plan” (as defined in Section 3(1) of ERISA and in 29 C.F.R. §2510.3-1) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health

 

4

benefits (including medical, prescription drug, dental, vision and mental health and substance use disorder), disability benefits, or life, accidental death and disability, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, contribution funding toward a health savings account, flexible spending accounts, tuition reimbursement or adoption assistance programs or cashable credits.

Section 1.2. References; Interpretation. References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation.” Unless the context otherwise requires, references in this Agreement to Articles, Sections, Annexes, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein” and words of similar meaning when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement. The words “written request” when used in this Agreement shall include email.

Reference in this Agreement to any time shall be to New York City, New York time unless otherwise expressly provided herein. Unless the context requires otherwise, references in this Agreement to “Illumina” shall also be deemed to refer to the applicable member(s) of the Illumina Group, references to “GRAIL” shall also be deemed to refer to the applicable member(s) of the GRAIL Group and, in connection therewith, any references to actions or omissions to be taken, or refrained from being taken, as the case may be, by Illumina or GRAIL shall be deemed to require Illumina or GRAIL, as the case may be, to cause the applicable members of the Illumina Group or the GRAIL Group, respectively, to take, or refrain from taking, any such action.

ARTICLE II

General Principles

Section 2.1. Nature of Liabilities. All Liabilities assumed or retained by a member of the Illumina Group under this Agreement shall be Illumina Liabilities. All Liabilities assumed or retained by a member of the GRAIL Group under this Agreement shall be GRAIL Liabilities.

Section 2.2. Assumption and Retention of Liabilities Generally. (a) From and after the Effective Time, except as otherwise provided in this Agreement, Illumina shall, or shall cause one or more members of the Illumina Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill: (i) all Liabilities under all Illumina Benefit Arrangements, whenever incurred; (ii) all Liabilities with respect to the employment, service, termination of employment or termination of service of all Illumina Employees and their respective dependents and beneficiaries (and any alternate payees in respect thereof), whenever incurred; (iii) all Liabilities with respect to all Illumina Former Employees and their respective dependents and beneficiaries (and any alternate payees in respect thereof) to the extent such Liabilities are with respect to employment or service to the Illumina Group or the termination of such employment or service with the Illumina Group, whenever incurred; and (iv) all other Liabilities or obligations expressly assigned to or assumed by a member of the Illumina Group under this Agreement.

 

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(b) From and after the Effective Time, except as otherwise provided in this Agreement, GRAIL shall, or shall cause one or more members of the GRAIL Group to, accept, assume (or, as applicable, retain) and perform, discharge and fulfill: (i) all Liabilities under all GRAIL Benefit Arrangements, whenever incurred; (ii) all Liabilities with respect to the employment, service, termination of employment or termination of service of all GRAIL Employees, and their respective dependents and beneficiaries (and any alternate payees in respect thereof), whenever incurred; (iii) all Liabilities with respect to all GRAIL Former Employees and their respective dependents and beneficiaries (and any alternate payees in respect thereof) to the extent such Liabilities are with respect to employment or service to the GRAIL Group or the termination of such employment or service with the GRAIL Group, whenever incurred; and (iv) all other Liabilities or obligations expressly assigned to or assumed by a member of the GRAIL Group under this Agreement.

(c) The Parties shall promptly reimburse one another, upon reasonable request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the cost of any obligations or Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates.

Section 2.3. Collective Bargaining Agreements. Notwithstanding anything in this Agreement to the contrary, Illumina and GRAIL shall, to the extent required by applicable Law, take or cause to be taken all actions that are necessary (if any) for GRAIL or a member of the GRAIL Group to continue to maintain and comply, in each case, as applicable, with any Collective Bargaining Agreements and any pre-existing collective bargaining relationships (in each case including obligations that arise in respect of the period both before and after the date of employment by the GRAIL Group) in respect of any GRAIL Employees based in the United Kingdom and any applicable Employee Representatives. Nothing in this Agreement is intended to alter the provisions of any applicable Collective Bargaining Agreement or modify in any way the obligations of the GRAIL Group to any applicable Employee Representative or any other Person as described in such agreement.

Section 2.4. Information and Consultation. The Parties shall comply with all requirements and obligations to inform, consult or otherwise notify any Illumina Employees or GRAIL Employees or Employee Representatives in relation to the transactions contemplated by this Agreement and the Separation Agreement, whether required pursuant to any Collective Bargaining Agreement or other applicable Law.

 

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Section 2.5. Non-Acceleration; Non-Termination of Employment. Except as otherwise required by applicable Law (if any), neither this Agreement, the Separation Agreement nor any Ancillary Agreement shall or shall be construed so as to create any right (other than rights to receive Converted GRAIL Awards) or accelerate any entitlement to any compensation or benefit on the part of any GRAIL Employee, GRAIL Former Employee, Illumina Employee or Illumina Former Employee. Without limiting the generality of the foregoing, except as otherwise required by applicable Law, none of the transactions contemplated by or undertaken pursuant to this Agreement, the Separation Agreement or any Ancillary Agreement shall (i) cause any individual to be deemed to have incurred a termination of employment, (ii) have created any entitlement to any severance payments or benefits or the commencement of any compensation or benefits under any GRAIL Benefit Arrangement or Illumina Benefit Arrangement or (iii) constitute or give rise to an “employment loss” or employment separation within the meaning of the federal Worker Adjustment and Retraining Notification Act (WARN) of 1988 (the “WARN Act”), or any other foreign, federal, state or local Law or other legal requirement addressing mass employment separations.

Section 2.6. No Transfer of Assets. Nothing in this Agreement shall require any member of the Illumina Group or any Illumina Benefit Arrangement to transfer Assets or reserves with respect to the Illumina Benefit Arrangements to any member of the GRAIL Group or any GRAIL Benefit Arrangement or require any member of the GRAIL Group or any GRAIL Benefit Arrangement to transfer Assets or reserves with respect to the GRAIL Benefit Arrangements to any member of the Illumina Group or any Illumina Benefit Arrangement.

ARTICLE III

Equity Incentive Awards

Section 3.1. GRAIL Stock Plan. Effective on or before the Distribution Date, subject to the approval of Illumina and the Illumina Board (or any duly authorized committee thereof), GRAIL shall establish and adopt an equity compensation plan for the benefit of the GRAIL Group following the Distribution Date (the “GRAIL Stock Plan”). For the avoidance of doubt, the GRAIL Group shall not be permitted to grant any equity-based incentive compensation awards pursuant to the GRAIL Stock Plan or otherwise prior to the Distribution Date without Illumina’s prior written consent.

Section 3.2. GRAIL LTIP Award Valuation. Effective as of immediately prior to the Illumina RSU Conversion (as defined below), the Aggregate Award Value for each then outstanding and unvested portion of the GRAIL LTIP Award shall be adjusted in accordance with Section 1(b) of the applicable LTIP Award Agreement, with the Equity Value Percentage Change determined based on (a) an Equity Value that is equal to GRAIL’s average market capitalization determined by reference to the volume weighted average per share price of GRAIL Stock for the four trading days immediately following the Distribution Date, multiplied by the shares of GRAIL Stock outstanding, in each case, as reported by Bloomberg L.P., compared to (b) the Baseline Equity Value; provided that, for purposes of the foregoing, the Baseline Equity Value shall be deemed to be equal to the aggregate equity value of GRAIL as of the applicable Grant Date as reflected in the consolidated financial statements of Illumina and its consolidated Subsidiaries included or incorporated by reference in the materials filed or furnished, as applicable, with the SEC by Illumina for the fiscal quarter in which such Grant Date occurred. For the avoidance of doubt, the date on which the conversion described in the immediately preceding sentence occurs shall be a Quarterly Measurement Date.

 

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Section 3.3. Illumina RSU Conversion. Effective as of immediately prior to the Distribution, each then outstanding and unvested portion of the GRAIL LTIP Award shall be converted (such conversion, including the proviso below, the “Illumina RSU Conversion”) into an award of restricted stock units with respect to Illumina Stock (each, a “Converted Cash Award”) in accordance with Section 2(a) of the applicable LTIP Award Agreement, with the number of shares of Illumina Stock subject to each Converted Cash Award equal to the product of (a) the applicable Aggregate Award Value (as determined in Section 3.2) divided by (b) the closing price of Illumina Stock on the date of the Illumina RSU Conversion; provided that, with respect to the portion of the Converted Cash Award that has a regularly scheduled vesting date (based on the original vesting date set forth in the applicable LTIP Award Agreement without accounting for any accelerated vesting entitlements under any GRAIL Benefit Arrangement) after the Distribution Date but on or before December 31, 2024, the number of shares of Illumina Stock subject to such portion shall be adjusted, to the extent such adjustment would result in an increase, following the conversion described above in order to be equal to (i) one-fourth of the Aggregate Award Value of the applicable GRAIL LTIP Award, determined as of the applicable Grant Date (i.e., without applying any Equity Value Percentage Change since the Grant Date, including that provided for in Section 3.2) divided by (ii) the closing price of Illumina Stock on the date of the Illumina RSU Conversion. For the avoidance of doubt, the foregoing calculation shall be rounded up to the nearest whole restricted stock unit.

Section 3.4. GRAIL RSU Conversion.

(a) Converted Cash Award. Effective as of the Distribution, each Converted Cash Award shall be equitably adjusted in accordance with Section 15(a) of the Illumina LTIP by converting such Converted Cash Award into an award of restricted stock units with respect to GRAIL Stock (each, a “Converted GRAIL RSU”), with the number of shares of GRAIL Stock subject to each Converted GRAIL RSU equal to the product, rounded to the nearest whole share, of (a) the number of shares of Illumina Stock subject to such Converted Cash Award as of immediately prior to the Distribution and (b) the GRAIL RSU Conversion Ratio. All other terms and conditions of the Converted GRAIL RSUs, including vesting and payment timing terms, shall be the terms and conditions that applied to the applicable Converted Cash Award.

(b) GRAIL 2024 Cash-Based Incentive Award. Effective as of the Distribution, each then outstanding and unvested portion of each GRAIL 2024 Cash-Based Incentive Award shall be converted into an award of restricted stock units with respect to GRAIL Stock (each, a “Converted GRAIL 2024 Cash-Based Incentive Award”), with the number of shares of GRAIL Stock subject to each Converted GRAIL 2024 Cash-Based Incentive Award determined in accordance with Section 2 of the applicable 2024 Cash-Based Incentive Award Agreement.

 

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Section 3.5. Option Awards. Effective as of the Distribution, each Illumina Option Award held as of immediately prior to the Distribution by any GRAIL Employee, whether vested or unvested, shall be converted into an option to purchase shares of GRAIL Stock (a “Converted GRAIL Option”), with the number of shares of GRAIL Stock subject to the Converted GRAIL Option equal to the product, rounded down to the nearest whole share, of (a) the number of shares of Illumina Stock subject to such Illumina Option Award as of immediately prior to the Distribution and (b) the GRAIL Option Conversion Ratio. Each Converted GRAIL Option shall have a per-share exercise price equal to (i) the per-share exercise price of the corresponding Illumina Option Award divided by (ii) the GRAIL Option Conversion Ratio, rounded up to the nearest cent. All other terms and conditions of the Converted GRAIL Options, including vesting terms, shall be the terms and conditions that applied to the applicable Illumina Option Award.

Section 3.6. Miscellaneous. For the avoidance of doubt, each Converted GRAIL RSU, Converted GRAIL 2024 Cash-Based Incentive Award and Converted GRAIL Option shall take into account (and count as continued employment or service) all employment and service with both Illumina and GRAIL, and their respective Subsidiaries and Affiliates, for purposes of determining when such awards vest and terminate. The GRAIL Group shall be solely responsible for all Liabilities with respect to the GRAIL Stock Plan and the Converted GRAIL RSUs, Converted GRAIL 2024 Cash-Based Incentive Award and Converted GRAIL Options. The Parties shall take all actions reasonably necessary or appropriate so that the GRAIL LTIP Awards, GRAIL 2024 Cash-Based Incentive Awards and the equity-based incentive compensation awards granted under the Illumina LTIP, in each case, outstanding as of immediately prior to the Distribution shall be treated as set forth in this Article III. The adjustment or conversion of any equity-based incentive compensation award pursuant to Sections 3.4 and 3.5 shall be effectuated in a manner that is intended to preserve the economic value of the award on the Distribution Date (after giving effect to Sections 3.2 and 3.3) and to comply with applicable Law and avoid the imposition of any penalty or other taxes on the holders thereof pursuant to Code Section 409A or otherwise, and shall be interpreted in accordance with the foregoing intent for all purposes.

ARTICLE IV

Non-Qualified Deferred Compensation

Section 4.1. Treatment of Illumina Non-Qualified Plans. The Illumina Group shall retain sponsorship of each Illumina Non-Qualified Plan and all Assets and Liabilities arising out of or relating to such Illumina Non-Qualified Plan, including those relating to GRAIL Employees (to the extent accrued and vested under the terms of the applicable plans). Following the Distribution Date, GRAIL shall notify Illumina of any “separation from service” under Section 409A of the Code of the GRAIL Employee who participates in an Illumina Non-Qualified Plan, as promptly as practicable but in no event later than thirty (30) days thereafter, and shall promptly provide to Illumina any other relevant information reasonably requested by Illumina for purposes of administering payments pursuant to the Illumina Non-Qualified Plans to such GRAIL Employee. In the event of a subsequent acquisition, divestiture, spinoff or other corporate transaction involving the GRAIL Group that is not treated as a “separation from service” under an Illumina Non-Qualified Plan, GRAIL shall use commercially reasonable efforts to ensure comparable cooperation from the successor employer.

 

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Section 4.2. No Separation from Service. The Parties acknowledge that none of the transactions contemplated by this Agreement, the Separation Agreement or any Ancillary Agreement shall be treated as a “separation from service” for purposes of the Illumina Non-Qualified Plans for any participant therein.

ARTICLE V

Additional Matters

Section 5.1. Code Section 409A. Notwithstanding anything in this Agreement or the Tax Matters Agreement to the contrary, the Parties shall negotiate in good faith regarding the need for any treatment different from that otherwise provided herein with respect to the payment of compensation to ensure that the treatment of such compensation does not cause the imposition of a Tax under Section 409A of the Code. In no event, however, shall any Party be liable to another in respect of any Taxes imposed under, or any other costs or Liabilities relating to, Section 409A of the Code.

Section 5.2. Confidentiality. Article VI of the Separation Agreement is hereby incorporated into this Agreement mutatis mutandis.

Section 5.3. Tax Deductions. The Illumina Group shall be solely entitled to claim any income Tax deduction arising after the Effective Time with respect to any payment or benefit under any Illumina Benefit Arrangement. The GRAIL Group shall be solely entitled to claim any income Tax deduction arising after the Effective Time with respect to any payment or benefit under any GRAIL Benefit Arrangement.

ARTICLE VI

General And Administrative

Section 6.1. Employer Rights. Nothing in this Agreement shall be deemed to be an amendment to any Illumina Benefit Arrangement or GRAIL Benefit Arrangement or to prohibit Illumina, GRAIL, or any member of the Illumina Group or GRAIL Group, as the case may be, from amending, modifying or terminating any Illumina Benefit Arrangement or GRAIL Benefit Arrangement at any time within its sole discretion.

Section 6.2. Effect on Employment. Nothing in this Agreement is intended to or shall confer upon any Illumina Employee, Illumina Former Employe, GRAIL Employee, or GRAIL Former Employee or any other employee or service provider of Illumina, the Illumina Group, GRAIL or the GRAIL Group any right to continued employment, continued service, or any recall or similar rights to any such individual on layoff or any type of approved leave.

 

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Section 6.3. Consent of Third Parties. If any provision of this Agreement is dependent on the consent of any third party and such consent is withheld, the Parties shall use their commercially reasonable efforts to implement the applicable provisions of this Agreement to the fullest extent practicable. If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, the Parties hereto shall negotiate in good faith to implement the provision (as applicable) in a mutually satisfactory manner.

Section 6.4. Access to Employees. On and after the Effective Time, Illumina and GRAIL shall, or shall cause each of their respective Affiliates to, make available to each other those of their employees who may reasonably be needed in order to defend or prosecute any legal or administrative action (other than a legal action between Illumina and GRAIL) to which any employee or director of the Illumina Group or the GRAIL Group or any Illumina Benefit Arrangement or GRAIL Benefit Arrangement is a party and which relates to an Illumina Benefit Arrangement or GRAIL Benefit Arrangement. The Party to whom an employee is made available in accordance with this Section 6.4 shall pay or reimburse the other Party for all reasonable expenses which may be incurred by such employee in connection therewith, including all reasonable travel, lodging, and meal expenses, but excluding any amount for such employee’s time spent in connection herewith.

Section 6.5. Beneficiary Designation/Release of Information/Right to Reimbursement. To the extent permitted by applicable Law and except as otherwise provided for in this Agreement, all beneficiary designations, authorizations for the release of information and rights to reimbursement made by or relating to GRAIL Employees or GRAIL Former Employees under Illumina Benefit Arrangements shall be transferred to and be in full force and effect under the corresponding GRAIL Benefit Arrangements until such beneficiary designations, authorizations or rights are replaced or revoked by, or no longer apply, to the relevant GRAIL Employee or GRAIL Former Employee.

Section 6.6. No Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and, except to the extent otherwise expressly provided herein, nothing in this Agreement, express or implied, is intended to confer any rights, benefits, remedies, obligations or Liabilities under this Agreement upon any Person, including any GRAIL Employee, GRAIL Former Employee, Illumina Employee, Illumina Former Employee or other current or former employee, officer, director or contractor of the Illumina Group or GRAIL Group, other than the Parties and their respective successors and assigns.

Section 6.7. No Acceleration of Benefits. Except as otherwise provided in this Agreement, no provision of this Agreement shall be construed to create any right, or accelerate vesting or entitlement, to any compensation or benefit whatsoever on the part of any GRAIL Employee, GRAIL Former Employee, Illumina Employee, Illumina Former Employee or other former, current or future employee of the Illumina Group or GRAIL Group under any Illumina Benefit Arrangement or GRAIL Benefit Arrangement. Without limiting the generality of the foregoing, neither the Separation nor the Distribution shall cause any individual to be deemed to have incurred a termination of employment or to have created any entitlement to any severance payments or benefits or the commencement of any benefits under any Illumina Benefit Arrangement or GRAIL Benefit Arrangement. Neither the Separation nor the Distribution shall constitute a “change in control” (or term of similar meaning) for purposes of any Illumina Benefit Arrangement or any GRAIL Benefit Arrangement.

 

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Section 6.8. Employee Benefits Administration. At all times following the date hereof, the Parties will cooperate in good faith as necessary to facilitate the administration of employee benefits and the resolution of related employee benefit claims with respect to GRAIL Employees, including with respect to the provision of employee-level information necessary for the other Party to manage, administer, finance and file required reports with respect to such administration.

ARTICLE VII

Miscellaneous

Section 7.1. Entire Agreement; Power.

(a) This Agreement and the Separation Agreement, including the Exhibits and Schedules thereto, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments, course of dealings and writings with respect to such subject matter.

(b) Illumina represents on behalf of itself and each other member of the Illumina Group, and GRAIL represents on behalf of itself and each other member of the GRAIL Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; and

(ii) this Agreement has been or will be duly executed and delivered by it and constitutes or will constitute a valid and binding agreement of it enforceable in accordance with the terms thereof.

Section 7.2. Counterparts. This Agreement may be executed in more than one counterpart, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to each of the Parties. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile, electronic mail (including .pdf, docusign or other electronic signature) or other transmission method shall be deemed to have been duly and validly delivered and shall be sufficient to bind the Parties to the terms and conditions of this Agreement.

 

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Section 7.3. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by email with receipt confirmed, or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 7.3):

If to Illumina, to:

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attention:   Legal Department

Email:   legalnotices@illumina.com

with a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Two Manhattan West

389 9th Avenue

New York, NY 10001

Attention: Andrew J. Pitts

     Ting S. Chen

     Daniel J. Cerqueira

Email:    apitts@cravath.com

     tchen@cravath.com

     dcerqueira@cravath.com

 

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If to GRAIL, to:

GRAIL, LLC

1525 O’Brien Drive

Menlo Park, California 94025

Attention:   Bob Ragusa

     Aaron Freidin

     Abram Barth

     Don Lang

Email:   bragusa@grailbio.com

     afreidin@grailbio.com

     abarth@grailbio.com

     dlang@grailbio.com

with a copy (which shall not constitute notice) to:

Latham & Watkins LLP

355 South Grand Avenue, Suite 100

Los Angeles, CA 90071

Attention:   W. Alex Voxman

     Andrew Clark

     Ross McAloon

     Alexa Berlin

Email:   alex.voxman@lw.com

     andrew.clark@lw.com

     ross.mcaloon@lw.com

     alexa.berlin@lw.com

Any Party may, by notice to the other Party, change the address and contact person to which any such notices are to be given.

Section 7.4. Waivers. Any consent required or permitted to be given by any Party to the other Party under this Agreement shall be in writing and signed by the Party giving such consent and shall be effective only against such Party.

Section 7.5. Specific Performance. Subject to Sections 9.2 and 9.3 of the Separation Agreement, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party or Parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at Law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at Law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at Law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties.

 

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Section 7.6. Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any Party hereto without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. Notwithstanding the foregoing, this Agreement shall be assignable to a bona fide third party in connection with a merger, reorganization, consolidation or the sale of all or substantially all the assets of a party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation of Law or pursuant to an agreement in form and substance reasonably satisfactory to the other Party to this Agreement; provided, however, that, no assignment permitted by this Section 7.6 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

Section 7.7. Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted assigns.

Section 7.8. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it sought to enforce such waiver, amendment, supplement or modification is sought to be enforced; provided, at any time prior to the Effective Time, the terms and conditions of this Agreement may be amended, modified or abandoned by and in the sole and absolute discretion of the Illumina Board without the approval of any Person, including GRAIL or Illumina; provided, further, that if any such amendment or modification would affect the GRAIL Group adversely in a material respect after the Effective Time, then such amendment or modification shall require the prior written consent of GRAIL.

Section 7.9. Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such Party or by any entity that becomes a Subsidiary of such Party at and after the Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable Party.

Section 7.10. Governing Law. This Agreement (and any claims or Disputes arising out of or related hereto or to the transactions contemplated hereby or to the inducement of any Party to enter herein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

Section 7.11. Interpretation. The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

 

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Section 7.12. No Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right, entitlement, obligation or recovery with respect to any matter arising out of the same facts and circumstances.

Section 7.13. No Waiver. No failure to exercise and no delay in exercising, on the part of any Party, any right, remedy, power or privilege hereunder shall operate as a waiver hereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 7.14. No Admission of Liability. The allocation of Assets and Liabilities herein is solely for the purpose of allocating such Assets and Liabilities between Illumina and GRAIL and is not intended as an admission of liability or responsibility for any alleged Liabilities vis-à-vis any third party, including with respect to the Liabilities of any non-wholly owned subsidiary of Illumina or GRAIL.

Section 7.15. Incorporation by Reference. Sections 9.2 (Negotiation by Senior Executives), 9.3 (Arbitration), 9.5 (Waiver of Jury Trial), 9.9 (Severability), 9.10 (Force Majeure), 9.14 (Headings), 9.15 (Survival of Covenants), 9.16 (Waivers of Default) and 9.19 (Construction) of the Separation Agreement are hereby incorporated into this Agreement mutatis mutandis.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

[Employee Matters Agreement Signature Page]

Exhibit 10.3

EXECUTION VERSION

STOCKHOLDER AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June 21, 2024, between Illumina, Inc., a Delaware corporation (“Illumina”), and GRAIL, LLC, a Delaware limited liability company (“GRAIL LLC”), to be converted to a corporation and renamed GRAIL, Inc. (the “Company”).

WHEREAS, Illumina and the Company have entered into a Separation and Distribution Agreement, dated as of June 21, 2024 (the “Separation Agreement”) and certain other ancillary agreements;

WHEREAS, Illumina currently owns the entire limited liability company interest of GRAIL LLC and will own all of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”);

WHEREAS, pursuant to the Separation Agreement, Illumina will distribute a portion of the issued and outstanding shares of Common Stock to holders of shares of Illumina common stock, on a pro rata basis (the “Distribution”), and retain any shares of Common Stock that are not distributed in the Distribution;

WHEREAS, following the Distribution, Illumina may (i) sell or transfer any retained shares, including pursuant to one or more offerings or other transactions registered under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) transfer all or a portion of the retained shares to Illumina stockholders as dividends or directly or indirectly in exchange for outstanding shares of Illumina common stock or in exchange for Illumina indebtedness (any such transaction described in this clause (ii), an “Other Disposition”);

WHEREAS, Illumina desires to grant the Company a proxy to vote the retained shares in proportion to the votes cast by the Company’s other stockholders; and

WHEREAS, Illumina and the Company desire to make certain arrangements to provide Illumina and its permitted transferees with registration rights with respect to the retained shares.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties, intending to be legally bound, hereby agree as follows:

Section 1. Effectiveness of Agreement.

1.1. Effective Time. This Agreement shall become effective upon the effectiveness of the Separation (as defined in the Separation Agreement) (the “Effective Time”).

1.2. Shares Covered. This Agreement covers all shares of Common Stock that are beneficially owned by Illumina as of the Effective Time (the “Shares”). The Shares shall include any securities issued or issuable with respect to the Shares by way of a stock dividend or a stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization.

Illumina and any Permitted Transferees (as defined in Section 2.5) are each referred to herein as a “Holder” and collectively as the “Holders”, and the Holders of Shares proposed to be included in any registration under this Agreement are each referred to herein as a “Selling Holder” and collectively as the “Selling Holders”.

Section 2. Demand Registration.

2.1. Notice. Upon the terms and subject to the conditions set forth herein, upon written notice of any Holder requesting that the Company effect the registration under the Securities Act of 1933, as amended (the “Securities Act”), of all or a portion of the Shares held by such Holder, which notice shall specify the Shares intended to be disposed of by such Holder and the intended method or methods of disposition of such Shares (which methods may include a Shelf Registration (as such term is defined in Section 2.6)), the Company will, no later than the fifth Business Day (as such term is defined in Section 10.7(g)) after receipt of such notice from any Holder, give written notice of the proposed registration to all other Holders, if any, and will use its reasonable best efforts to effect (at the earliest reasonable date) the registration under the Securities Act of such Shares (and the Shares of any other Holders joining in such registration request as specified in a written notice received by the Company within 10 days after receipt of the Company’s written notice of the proposed registration) for disposition in accordance with the intended method or methods of disposition stated in such registration request (each registration request pursuant to this Section 2.1 is sometimes referred to herein as a “Demand Registration”); provided, however, that:

(a) the Company shall not be obligated to effect registration with respect to any Shares pursuant to this Section 2.1 (i) in violation of the Separation Agreement, (ii) in violation of any underwriting agreement entered into in connection with any offering effected in accordance with this Agreement (so long as the lock-up period in such underwriting agreement does not exceed 90 days) or (iii) within 60 days after the effective date of a previous registration, other than a Shelf Registration, effected with respect to Shares pursuant to this Section 2;

(b) if at the time a Demand Registration is requested pursuant to this Section 2, the Company determines in good faith that (i) such Demand Registration would require the disclosure of material nonpublic information, the disclosure of which would be reasonably likely to have a material adverse effect on the Company, (ii) such Demand Registration would materially impede, delay or interfere with any material financing, acquisition, divestiture, joint venture, merger, consolidation, other business combination, corporate reorganization, tender offer or other material transaction of the Company or (iii) the Company is unable to comply with SEC requirements for effectiveness of such Demand Registration (each of clauses (i) through (iii), a “Disadvantageous Condition”), the Company may postpone the filing or effectiveness (but not the preparation) of such registration until the earlier of (A) 7 days after the date on which the Disadvantageous Condition no longer exists or (B) 90 days after the date on which the Company makes such determination that a Disadvantageous Condition exists; provided, however, that the Company may delay a Demand Registration pursuant to this Section 2.1(b) no more than twice during any 12-month period following the Distribution; and provided further that the postponement rights in this Section 2.1(b) and Section 4.3(a) shall not be applicable to the Holders for more than a total of 120 days during any 12-month period;

 

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(c) the number of Shares originally requested to be registered pursuant to any registration requested pursuant to this Section 2 shall cover Shares with an aggregate Fair Market Value (as defined below) as of the date of the notice delivered to the Company pursuant to this Section 2.1 of at least $100,000,000 or such lesser amount that constitutes all Shares owned by the Holders requesting such registration (for purposes of this Agreement, “Fair Market Value” shall mean, as of any date, the closing price per share of the Common Stock on the NASDAQ Global Select Market (“Nasdaq”) or, if the Common Stock is not listed on Nasdaq, any securities exchange on which such Common Stock is listed or admitted for trading on the trading day immediately preceding such date);

(d) if the intended method of disposition is a Demand Registration that is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Shares requested to be included in such offering exceeds the number of Shares which can be sold in an orderly manner in such offering within a price range acceptable to the Holders of a majority of the Shares initially requesting such registration or without materially adversely affecting the market for the Common Stock, the Company shall include in such registration the number of Shares requested by Holders of a majority of the Shares to be included therein which, in the opinion of such Holders based upon advice of the managing underwriters, can be sold in an orderly manner within the price range of such offering and without materially adversely affecting the market for the Common Stock, in accordance with the following priorities: (x) first, up to the number of Shares requested to be included in such registration by Illumina and its Affiliates (as defined below) and (y) second, up to the number of Shares requested to be included in such registration by Selling Holders other than Illumina and its Affiliates, pro rata among such Selling Holders of such Shares on the basis of the number of Shares requested to be registered by each such Selling Holder; and

(e) the Company shall not be obligated to effect more than five Demand Registrations in the aggregate, and no more than three Demand Registrations in any 12-month period; provided that, the Company shall not be required to effect a Demand Registration within sixty (60) days after the effective date of a previous registration by the Company, other than a Shelf Registration, effected pursuant to this Section Section 2.

For the purposes of this Agreement, an “Affiliate” of any Person (as defined in Section Section 6(e)) means a Person that controls, is controlled by or is under common control with such Person. As used herein, “control” of any entity means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise; provided, however, that (a) the Company and the other members of the GRAIL Group (as defined in the Separation Agreement) shall not be considered Affiliates of Illumina or any of the other members of the Illumina Group (as defined in the Separation Agreement) and (b) Illumina and the other members of the Illumina Group shall not be considered Affiliates of the Company or any of the other members of the GRAIL Group.

 

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2.2. Registration Expenses. All Registration Expenses (as defined in Section 8) for any registration requested pursuant to this Section 2 (including any registration that is delayed or withdrawn, subject to the provisions of Section 2.9) shall be paid by the Company.

2.3. Selection of Professionals. Illumina, in the event Illumina is participating, or the Holders of a majority of the Shares included in any Demand Registration, in the event Illumina is not participating, shall have the right to select the investment banks and managers to underwrite or otherwise administer the offering and counsel for the Selling Holders; provided that, such investment banks, managers and counsel shall also be approved by the Company, such approval not to be unreasonably withheld, conditioned or delayed; provided further that, for the avoidance of doubt, counsel for the Selling Holders may be (but shall not be required to be) the same counsel as counsel for the Company in such offering.

2.4. Third Person Shares. In the case of any offering for cash that is not an Other Disposition, the Company shall have the right to cause the registration of securities for sale for the account of any Person (as defined in Section Section 6(e)) (including the Company) other than the Selling Holders (the “Third Person Shares”) in any registration of the Shares requested pursuant to this Section 2 so long as the Third Person Shares are disposed of in accordance with the intended method or methods of disposition requested by Holders pursuant to this Section 2.

If a Demand Registration in which the Company proposes to include Third Person Shares is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Shares and Third Person Shares requested to be included in such offering exceeds the number of Shares and Third Person Shares which can be sold in an orderly manner in such offering within a price range acceptable to the Holders of a majority of the Shares initially requesting such registration or without materially adversely affecting the market for the Common Stock (the “Maximum Number”), the Company shall not include in such registration any Third Person Shares unless all of the Shares initially requested by Holders to be included therein are so included, and then only to the extent of the Maximum Number.

2.5. Permitted Transferees. As used in this Agreement, “Permitted Transferees” shall mean any transferee, whether direct or indirect, of Shares that (a) (i) as of the time of transfer of the Shares to such transferee is, and as of immediately prior to the sale of Shares pursuant to the Demand Registration or Piggyback Registration (as defined in Section 3.1), as the case may be, will be, a member of the Illumina Group (as defined in the Separation Agreement), (ii) is a financial intermediary (a “Participating Bank”) to whom Illumina or any member of the Illumina Group will transfer Shares in exchange, directly or indirectly, for any equity interest or indebtedness of Illumina or another member of the Illumina Group or (iii) acquires from any member or members of the Illumina Group an aggregate of at least 5% of the issued and outstanding shares of Common Stock as of the time of such acquisition and (b) is designated by Illumina (or a subsequent Holder) in a written notice to the Company. Any Permitted Transferee of the Shares shall be subject to and bound by and benefit from all of the terms and conditions herein applicable to Holders. For the avoidance of doubt, any Permitted Transferee of Shares shall be subject to and bound by and benefit from all of the terms and conditions applicable to Holders generally and not those applicable to Illumina (or any member of the Illumina Group) specifically including, without limitation, the voting provisions contained in Section Section 9. The notice required by this Section 2.5 shall be signed by both the transferring Holder and the Permitted Transferees so designated and shall include an undertaking by the Permitted Transferees to comply with the terms and conditions of this Agreement applicable to Holders.

 

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2.6. Shelf Registration; Other Disposition. With respect to any Demand Registration, the requesting Holders may, but shall not be required to, request the Company to effect a registration of the Shares (a) at any time after the date hereof when the Company is eligible to register the Shares on Form S-3 (or any successor form), under a registration statement pursuant to Rule 415 under the Securities Act (or any successor rule) (a “Shelf Registration”) or (b) in the form of an Other Disposition. The Company shall use its reasonable best efforts to comply with any such request, subject to the terms and conditions of this Agreement.

2.7. SEC Form; Information. The Company shall use its reasonable best efforts to cause Demand Registrations to be registered on Form S-3 (or any successor form), and if the Company is not then eligible under the Securities Act to use Form S-3, such Demand Registrations shall be registered on Form S-1 (or any successor form), or, in the case of an exchange offer, Form S-4 (or any successor form). The Company shall use its reasonable best efforts to become eligible to use Form S-3 and, after becoming eligible to use Form S-3, shall use its reasonable best efforts to remain so eligible. All such Demand Registrations shall comply with the applicable requirements of the Securities Act and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) thereunder, and, together with each prospectus included, filed or otherwise furnished by the Company in connection therewith, the relevant registration statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Company shall timely file all reports on Forms 10-K, 10-Q and 8-K (or any successor forms), and all material required to be filed, pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the extent that such filing shall be a condition to the initial filing or continued use or effectiveness of any Demand Registration or to the extent required to enable any Holder to sell Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act (or any similar rule or regulation hereafter promulgated by the SEC). From and after the date hereof through the earlier of (a) the expiration or termination of this Agreement or (b) the date upon which the Illumina Group ceases to own any Shares, the Company shall forthwith upon written request by a Holder (i) furnish to any Holder (A) a written statement by the Company as to whether it has complied with such requirements and, if not, the specifics thereof, (B) a copy of the most recent annual or quarterly report of the Company and (C) such other reports and documents filed by the Company with the SEC and (ii) take such further action as such Holder may reasonably request in availing itself of an exemption for the sale of Shares without registration under the Securities Act.

2.8. Other Registration Rights. The Company shall not (i) grant to any Persons the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, whether pursuant to “demand,” “piggyback” or other rights that are more favorable to such Persons as compared to the rights of the Holders under this Agreement or (ii) enter into any agreement, take any action or permit any change to occur, with respect to securities that violates or subordinates the rights of the Holders under this Agreement.

 

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2.9. Withdrawal. At any time prior to the effective date of the registration statement or the filing of a prospectus relating to such registration, the Holder making such request for registration may withdraw such request, without liability to any of the other Holders, by providing a written notice to the Company withdrawing such request. A request, so withdrawn, shall be considered to be a Demand Registration unless (a) such withdrawal arose out of the fault of the Company (in which case the Company shall be obligated to pay all Registration Expenses in connection with such withdrawn request), (b) such withdrawal was in response to the Company’s exercise of its postponement rights in Section 2.1(b) and Section 4.3(a) or (c) the Holder making such request for registration reimburses the Company for all Registration Expenses (other than the expenses set forth under Section 8(g)) in connection with such withdrawn request.

Section 3. Piggyback Registrations.

3.1. Notice and Registration. If the Company proposes to register any of its securities for public sale under the Securities Act (whether proposed to be offered for sale by the Company or any other Person), on a form and in a manner that would permit registration of the Shares for sale to the public under the Securities Act (a “Piggyback Registration”), it will give at least 15 days’ advance written notice to the Holders of its intention to do so, and upon the written request of any or all of the Holders delivered to the Company within 10 days after the giving of any such notice (which request shall specify the Shares intended to be disposed of by such Holders), the Company will use its reasonable best efforts to effect, in connection with the registration of such other securities, the registration under the Securities Act of all of the Shares which the Company has been so requested to register by such Holders (which shall then become Selling Holders), to the extent required to permit the disposition (in accordance with the same method of disposition as the Company proposes to use to dispose of the other securities) of the Shares to be so registered; provided, however, that:

(a) if, at any time after giving such written notice of its intention to register any of its other securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason to delay registration of, or not to register, such other securities, the Company may, at its election, give written notice of such determination to the Selling Holders (or, if prior to the expiration of the 15-day period described above in this Section 3.1, the Holders) and, thereupon, (i) in the case of a determination to delay registration, the Company shall be permitted to delay registering such Shares for the same period as the delay in registering such other securities and (ii) in the case of a determination not to register, the Company shall be relieved of its obligation to register such Shares in connection with the registration of such other securities (but not from its obligation to pay Registration Expenses to the extent incurred in connection therewith as provided in Section 3.3), without prejudice, however, to the rights (if any) of any Selling Holders immediately to request (subject to the terms and conditions of Section 2) that such registration be effected as a registration under Section 2 or to include such Shares in any subsequent Piggyback Registration pursuant to this Section 3;

 

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(b) the Company shall not be required to effect any registration of the Shares under this Section 3 incidental to the registration of any of its securities (i) on Form S-4 or S-8 or any successor or similar forms, (ii) relating to equity securities issuable upon exercise of employee stock or similar options or in connection with any employee benefit or similar plan of the Company or (iii) in connection with an acquisition of, or an investment in, another entity by the Company;

(c) the Company’s filing of a Shelf Registration shall not be deemed to be a Piggyback Registration; provided, however, that the proposal to file any prospectus supplement filed pursuant to a Shelf Registration with respect to an offering of the Company’s securities (whether proposed to be offered for sale by the Company or any other Person) will be a Piggyback Registration unless such offering qualifies for an exemption under this Section 3.1; and provided further that, if the Company files a Shelf Registration, the Company agrees that it shall use its reasonable best efforts to include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act in order to ensure that the Holders may be added to such Shelf Registration at a later time through the filing of a prospectus supplement rather than a post-effective amendment;

(d) if a Piggyback Registration is an underwritten registration on behalf of the Company (whether or not selling security holders are included therein) and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number that can be sold in such offering without materially adversely affecting the marketability of the offering or the market for the Common Stock (the “Piggyback Maximum Number”), the Company shall include the following securities in such registration up to the Piggyback Maximum Number and in accordance with the following priorities: (w) first, the securities the Company proposes to sell, (x) second, up to the number of Shares requested to be included in such registration by Illumina, (y) third, up to the number of Shares requested to be included in such registration by Selling Holders other than Illumina, pro rata among such Selling Holders of such Shares on the basis of the number of Shares requested to be registered by each such Selling Holder and (z) fourth, up to the number of any other securities requested to be included in such registration;

(e) no registration of the Shares effected under this Section 3 shall relieve the Company of its obligation to effect a registration of Shares pursuant to Section 2; and

(f) at any time prior to the execution of an underwriting agreement with respect thereto, any Selling Holder may withdraw any or all of its Shares from a Piggyback Registration by providing a written notice to the Company.

3.2. Selection of Professionals. In the event of any Piggyback Registration, the Company shall select the investment banks and managers to underwrite or otherwise administer the offering and the financial printer for the offering. One counsel for the Holders participating in such offering may be selected by (i) Illumina, in the event Illumina is participating in such offering, or (ii) Holders of a majority of the Shares included in such offering, in the event Illumina is not participating in such offering, provided that, in the case of both clauses (i) and (ii)

 

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above, such selection of counsel shall also be approved by the Company, such approval not to be unreasonably withheld, conditioned or delayed, provided further that, for the avoidance of doubt, counsel for the Selling Holders may be (but shall not be required to be) the same counsel as counsel for the Company in such offering.

3.3. Registration Expenses. The Company shall pay all of the Registration Expenses in connection with any registration pursuant to this Section 3.

Section 4. Registration Procedures.

4.1. Registration and Qualification. If and whenever the Company is required to use its reasonable best efforts to effect the registration of any of the Shares under the Securities Act as provided in Sections 2 and 3, including an underwritten offering pursuant to a Shelf Registration, the Company shall use its reasonable best efforts to:

(a) as promptly as practicable (and in any event within 30 days (in the case of a registration statement on Form S-3 or Form S-4) or 60 days (in the case of all other registration statements)) after the date of any request for registration under Section 2, prepare and file with the SEC a registration statement with respect to such Shares and cause such registration statement to become effective as soon as practicable after the initial filing thereof; provided that, before filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall furnish to the Selling Holders and the underwriters, if any, copies of all such documents proposed to be filed (which documents shall be subject to the review and comment of such parties) and the Company shall not file with the SEC any registration statement or prospectus or amendments or supplements thereto to which the Selling Holders or the underwriters, if any, shall reasonably object;

(b) except in the case of a Shelf Registration effected on Form S-3, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all such Shares until the earlier of (i) such time as all such Shares have been disposed of in accordance with the intended methods of disposition set forth in such registration statement or (ii) the expiration of 90 days after such registration statement becomes effective, plus the number of days that any filing or effectiveness has been delayed under Section 2.1(b);

(c) in the case of a Shelf Registration effected on Form S-3, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Shares subject thereto for a period ending on the earlier of (i) 36 months after the effective date of such registration statement plus the number of days that any filing or effectiveness has been delayed under Section 2.1(b) or suspended under Section 4.3(a) and (ii) the date on which all the Shares subject thereto have been sold pursuant to such registration statement;

 

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(d) furnish to the Selling Holders and the underwriters, if any, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus and such other documents as the Selling Holders or such underwriters may reasonably request;

(e) register or qualify all of the Shares covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the Selling Holders or any underwriter shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable the Selling Holders or any underwriter to consummate the disposition in such jurisdictions of the Shares covered by such registration statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where it is not so qualified, subject itself to taxation in any such jurisdiction or consent to general service of process in any such jurisdiction;

(f) in the case of an underwritten offering, (i) furnish to the underwriters, addressed to them, an opinion of counsel for the Company and (ii) furnish to the underwriters, addressed to them, a “cold comfort” letter signed by the independent public accountants who have certified the Company’s financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities and such other matters as the underwriters may reasonably request, in each case, in form and substance and as of the dates reasonably satisfactory to the underwriters;

(g) enter into such customary agreements (including, if applicable, an underwriting agreement containing customary provisions for indemnification and contribution covering the Selling Holders, the underwriters and their affiliates) and take such other actions as the Selling Holders shall reasonably request in order to expedite or facilitate the disposition of such Shares (it being understood that the relevant Selling Holders may be parties to any such underwriting agreement and may, at their option, require that the Company make to and for the benefit of such Selling Holders the representations, warranties and covenants of the Company which are being made to and for the benefit of such underwriters);

(h) notify the Selling Holders and the managing underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company, (i) when the applicable registration statement or any amendment thereto has been filed or becomes effective, and when the applicable prospectus or any amendment or supplement to such prospectus has been filed, (ii) of any comments (written or oral) by the SEC or

 

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any request by the SEC or any other federal or state governmental authority (written or oral) for amendments or supplements to such registration statement or such prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or any order preventing or suspending the use of any preliminary or final prospectus or the initiation or threatening of any proceedings for such purposes, (iv) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in all material respects and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose;

(i) comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable after the effective date of the relevant registration statement (and in any event within 90 days after the end of such 12-month period described hereafter), an earnings statement (which need not be audited) covering the period of at least 12 consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(j) immediately notify the Selling Holders and the managing underwriters, if any, at any time when a prospectus relating to a registration pursuant to Section 2 or 3 is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and at the request of the Selling Holders or the underwriters prepare and file with the SEC (and furnish to the Selling Holders and the underwriters a reasonable number of copies of) a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(k) permit any Selling Holders comprising holders of a majority of the Shares to be included in such registration to participate in the preparation of such registration statement (including having prompt access to any SEC comment letters or other communications in connection with such registration and the Company’s responses thereto) and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Selling Holders and their counsel should be included, subject to the Company’s approval, such approval not to be unreasonably withheld, conditioned or delayed;

(l) provide and cause to be maintained a transfer agent and registrar for all such Shares covered by such registration statement not later than the effective date of such registration statement;

 

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(m) provide a CUSIP number for all such Shares, not later than the effective date of such registration statement;

(n) in the case of an underwritten offering, cause the senior executive officers of the Company to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto, including participation of such officers in road show presentations, during normal business hours, upon reasonable notice and in a manner that does not unreasonably interfere with the operations of the Company’s business;

(o) cooperate with the Selling Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Shares to be sold, and cause such Shares to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Shares to the underwriters or, if not an underwritten offering, in accordance with the instructions of the Selling Holders at least one Business Day prior to any sale of Shares and instruct any transfer agent and registrar of Shares to release any stop transfer orders in respect thereof; provided that the Company may satisfy its obligations under this Section 4.1(o) without issuing physical stock certificates through the use of the Depository Trust Company’s Direct Registration System;

(p) take no direct or indirect action prohibited by Regulation M under the Exchange Act; provided, however, that, to the extent that any prohibition is applicable to the Company, the Company will take such action as is necessary to make any such prohibition inapplicable;

(q) in the event of the issuance of any stop order suspending the effectiveness of such registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such registration statement for sale in any jurisdiction, the Company shall use its reasonable best efforts promptly to obtain the withdrawal of such order;

(r) cause the Shares covered by such registration statement to be registered with or approved by such other government agencies or authorities, as may be necessary to enable the sellers thereof to consummate the disposition of such Shares;

(s) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Shares; and

(t) without limiting the applicability of, and obligations described in, clauses (a) through (s) above, in the case of any Demand Registration in the form of an Other Disposition, the Company shall take such corresponding actions described in clause (a) through (s) above that are customarily applicable to such transactions and shall use its reasonable best efforts to effect such Other Disposition.

 

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The Company may require the Selling Holders to furnish the Company with such information regarding the Selling Holders and the distribution of such Shares, and other customary certifications and agreements, as the Company may from time to time reasonably request in writing and as shall be required by law, the SEC or any securities exchange on which any shares of Common Stock are then listed for trading in connection with any registration.

Each Selling Holder will as promptly as reasonably practicable notify the Company, at any time when a prospectus relating thereto is required to be delivered (or deemed delivered) under the Securities Act, of the occurrence of an event, of which such Selling Holder has knowledge, relating to such Selling Holder or its disposition of Shares thereunder requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered (or deemed delivered) to the purchasers of such Shares, such prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

Illumina agrees, and any other Selling Holder agrees by acquisition of such Shares, that, upon receipt of any written notice from the Company of the occurrence of any event of the kind described in Section 4.1(j), such Selling Holder will forthwith discontinue disposition of Shares pursuant to such registration statement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.1(j), or until such Selling Holder is advised in writing by the Company that the use of the prospectus may be resumed, and if so directed by the Company, such Selling Holder will deliver to the Company (at the Company’s expense) all copies of the prospectus covering such Shares current at the time of receipt of such notice. In the event the Company shall give any such notice, the period during which the applicable registration statement is required to be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Shares covered by such registration statement either receives the copies of the supplemented or amended prospectus contemplated by Section 4.1(j) or is advised in writing by the Company that the use of the prospectus may be resumed.

No Selling Holder may participate in any underwritten offering or registered exchange offer hereunder unless such Selling Holder (a) agrees to sell such Selling Holder’s securities on the basis provided in any underwriting agreements or other applicable agreements, approved by the Company or other Persons entitled to approve such agreements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, other applicable agreements and other documents reasonably required under the terms of such underwriting or other agreements or this Agreement.

Each Selling Holder agrees that, in connection with any offering pursuant to this Agreement, it will not prepare, use or refer to any “free writing prospectus” (as defined in Rule 405 of the Securities Act) without the prior written authorization of the Company, such approval not to be unreasonably withheld, conditioned or delayed, and will not distribute any written materials in connection with any offering of the Shares under any registration statement registered pursuant to this Agreement other than the applicable prospectus and any such free writing prospectus so authorized.

 

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4.2. Underwriting. If requested by the underwriters for any underwritten offering (or exchange agent for an exchange offer) in connection with a registration requested hereunder (including any registration under Section 3 which involves, in whole or in part, an underwritten offering), the Company will enter into an underwriting agreement with such underwriters (or exchange agent agreement with such exchange agents) for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements or exchange agent agreements, as applicable, with respect to that offering, including indemnification and contribution obligations and the provision of opinions of counsel and accountants’ letters to the effect and to the extent provided in Section 4.1(f). The Company may require that the Shares requested to be registered pursuant to Section 3 be included in such underwritten offering on the same terms and conditions as shall be applicable to the other securities being sold through underwriters under such registration; provided, however, that no Selling Holder shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such Holder and such Holder’s intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 6 hereof. The Selling Holders shall be parties to any such underwriting agreement, and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Selling Holders.

4.3. Blackout Periods for Shelf Registrations.

(a) At any time when a Shelf Registration effected pursuant to Section 2 relating to the Shares is effective, upon written notice from the Company to the Selling Holders that the Company has determined in good faith that (i) the Selling Holders’ sale of the Shares pursuant to the Shelf Registration would require the disclosure of material nonpublic information, the disclosure of which would be reasonably likely to have a material adverse effect on the Company, (ii) the Selling Holders’ sale of the Shares pursuant to the Shelf Registration would materially impede, delay or interfere with any material acquisition, divestiture, joint venture, merger, consolidation, other business combination, corporate reorganization, tender offer or other material transaction of the Company or (iii) the Company is unable to comply with SEC requirements for continued use or effectiveness of the Shelf Registration (each of clauses (i) through (iii), an “Information Blackout”), the Selling Holders shall suspend sales of the Shares pursuant to such Shelf Registration until the earlier of (A) the date upon which such material information is disclosed to the public or ceases to be material (or the Company otherwise complies with applicable SEC requirements), (B) 45 days after the date on which the Company makes such good faith determination that an Information Blackout exists (unless resuming use of the Shelf Registration is then prohibited by applicable SEC rules or published interpretations) or (C) such time as the Company notifies the Selling Holders that sales pursuant to such Shelf Registration may be resumed (the number of days from such suspension of sales of the Shares until the day when such sales may be resumed hereunder is hereinafter called a “Sales Blackout Period”). The postponement rights in this Section 4.3(a) and Section 2.1(b) and the holdback obligation in Section 4.5(c) shall not be applicable to the Holders for more than a total of 120 days during any 12-month period.

 

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(b) If there is an Information Blackout and the Selling Holders do not notify the Company in writing of their desire to cancel such Shelf Registration, the period set forth in Section 4.1(c)(i) shall be extended for a number of days equal to the number of days in the Sales Blackout Period. The fact that a Sales Blackout Period is required under this Section 4.3 or SEC rules shall not relieve the contractual duty of the Company as set forth in Section 2.7 to file timely reports and otherwise file material required to be filed under the Exchange Act.

4.4. Listing and Other Requirements. In connection with the registration of any offering of the Shares pursuant to this Agreement, the Company agrees to use its reasonable best efforts to effect the listing of such Shares on any securities exchange on which any shares of the Common Stock are then listed and otherwise facilitate the public trading of such Shares. The Company will take all other lawful actions reasonably necessary and customary under the circumstances to expedite and facilitate the disposition by the Selling Holders of Shares registered pursuant to this Agreement as described in the prospectus relating thereto, including timely preparation and delivery of stock certificates, if any, in appropriate denominations and furnishing any required instructions or legal opinions to the Company’s transfer agent in connection with Shares sold or otherwise distributed pursuant to an effective registration statement; provided that the Company may satisfy its obligations under this Section 4.4 without issuing physical stock certificates through the use of the Depository Trust Company’s Direct Registration System.

4.5. Holdback Agreements.

(a) The Company shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to, and during the 90-day period beginning on, the effective date of any registration statement in connection with a Demand Registration (other than a Shelf Registration) or a Piggyback Registration, except pursuant to such Demand Registration or Piggyback Registration or registrations on Form S-8 or S-4 or any successor form or unless the underwriters managing any such public offering otherwise agree.

(b) If the Holders of Shares notify the Company in writing that they intend to effect an underwritten sale of Shares registered pursuant to a Shelf Registration pursuant to Section 2, the Company shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for its equity securities, during the seven days prior to, and during the 90-day period beginning on, the date specified in such notice for such proposed sale, except pursuant to such intended Shelf Registration or registrations on Form S-8 or S-4 or any successor form or unless the underwriters managing any such public offering otherwise agree.

(c) If the Company completes an underwritten registration with respect to any of its securities (whether offered for sale by the Company or any other Person) on a form and in a manner that would have permitted registration of the Shares and the Company has complied with its obligations pursuant to Section Section 3 in connection with such underwritten registration, the Holders shall not effect any public sales or distributions of

 

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equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, until the termination of the holdback period required from the Company by any underwriters in connection with such previous registration; provided that the holdback period applicable to the Holders shall (i) in no event be longer than a period of seven days prior to, and during the 90-day period beginning on, the effective date of such registration statement, (ii) not apply to any distribution of Shares to stockholders of a Holder, (iii) not apply to any Holder owning less than 5% of the Company’s outstanding voting securities and (iv) not apply unless all directors and executive officers of the Company are subject to substantially comparable restrictions as those proposed to be imposed on the Holders; provided further that for the purposes of clause (iii) all members of the Illumina Group shall be treated as a single Selling Holder and that for the purposes of clause (iv), each such party shall, upon request, execute a lock-up agreement containing such terms in a customary form and, to the extent required by any underwriter participating in an underwritten public offering, the Company shall use reasonable best efforts to cause its executive officers and directors to execute such lock-up agreements in connection with such underwritten public offering, which lock-up agreements shall not have a duration shorter than that of the lock-up agreement or provisions applicable to the Company.

Section 5. Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement registering the Shares under the Securities Act and each sale of the Shares thereunder, the Company will give each Selling Holder and the underwriters, if any, and their respective counsel and accountants representing such Selling Holders and underwriters, access to its reasonably requested financial and other records, pertinent corporate documents and properties of the Company and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of the Selling Holders and such underwriters or such counsel, to conduct a reasonable investigation within the meaning of the Securities Act; provided that each Selling Holder agrees that the information obtained by it pursuant to this Section Section 5 shall be kept confidential by it and, except as required by law, not disclosed by it, in each case, unless and until such information is made generally available to the public other than by such Selling Holder, and each Selling Holder further agrees that it will, upon learning that disclosure of such information is sought from such Selling Holder in a court of competent jurisdiction, promptly give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the information deemed confidential; provided further that for purposes of this Section Section 5, all members of the Illumina Group shall be treated as a single Selling Holder.

Section 6. Indemnification and Contribution.

(a) In the event of any registration of any of the Shares hereunder, the Company shall enter into customary indemnification arrangements to indemnify and hold harmless each of the Selling Holders, each of their respective directors, officers, employees, advisors and agents, each Person who participates as an underwriter in the offering or sale of such securities, each director, officer, employee, advisor and agent of each underwriter and each Person, if any, who controls each such Selling Holder or any such underwriter within the meaning of the Securities Act or the Exchange Act

 

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(collectively, the “Holder Covered Persons”) against any losses, claims, damages, liabilities (or actions or proceedings in respect thereof) and expenses, joint or several (each, a “Loss” and collectively, “Losses”), to which such Person may be subject under the Securities Act or otherwise insofar as such Losses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any related registration statement filed under the Securities Act, any preliminary prospectus or final prospectus included therein, or any amendment or supplement thereto, any free writing prospectus, or any document incorporated by reference therein, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus, in light of the circumstances under which they were made), and the Company will reimburse each such Holder Covered Person, as incurred, for any legal or any other expenses reasonably incurred by such Holder Covered Person in connection with investigating or defending any such Loss; provided, however, that the Company shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus or final prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company after the Distribution by such Selling Holder or such underwriter specifically for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any such Holder Covered Person and shall survive the transfer of such securities by the Selling Holders.

(b) Each of the Selling Holders, by virtue of exercising its respective registration rights hereunder, agrees and undertakes to enter into customary indemnification arrangements to indemnify and hold harmless (in the same manner and to the same extent as set forth in clause (a) of this Section 6) the Company, its directors, officers, employees, advisors and agents, each Person who participates as an underwriter in the offering or sale of such securities, each director, officer, employee, advisor and agent of each underwriter, and each Person, if any, who controls the Company or any such underwriter within the meaning of the Securities Act or the Exchange Act (collectively, the “Company Covered Persons”), with respect to any statement in or omission from such registration statement, any preliminary prospectus or final prospectus included therein, or any amendment or supplement thereto, or any free writing prospectus, if such statement or omission is contained in written information furnished by such Selling Holder to the Company specifically for inclusion in such registration statement or prospectus; provided, however, that the obligation for each Selling Holder to indemnify shall be several and not joint, and shall be limited to the net amount of proceeds received by such Selling Holder from the sale of Shares pursuant to such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Company Covered Person and shall survive the transfer of the registered securities by the Selling Holders.

 

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(c) Any Person entitled to indemnification hereunder (each, an “Indemnified Party”) shall (i) give prompt written notice to the Person against whom such indemnity may be sought (the “Indemnifying Party”) of any claim with respect to which it seeks indemnification; provided, however, that the failure to give prompt notice shall not impair any Indemnified Party’s rights to indemnification hereunder to the extent such failure has not materially prejudiced the Indemnifying Party; and (ii) unless in such Indemnified Party’s reasonable judgment a conflict of interest between such Indemnified Party and Indemnifying Party may exist with respect to such claim, permit such Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Party. For any such claim, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, (ii) in the reasonable judgment of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, including one or more defenses or counterclaims that are different from or in addition to those available to the Indemnifying Party, or (iii) such Indemnifying Party shall have failed to assume the defense within a reasonable time of notice pursuant to this Section 6(c). If such defense is assumed by the Indemnifying Party, no Indemnified Party will consent to entry of any judgment or enter into any settlement without the Indemnifying Party’s written consent to such judgment or settlement (but such consent shall not be unreasonably withheld, conditioned or delayed). No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding and (ii) does not include any injunctive or other equitable or non-monetary relief applicable to or affecting such Indemnified Party.

(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (a) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 6, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (b) contribution under the Securities Act may be required on the part of any such Holder or any such controlling person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and such Holder will contribute to the aggregate Losses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Holder on the other hand in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations, where the relevant fault of the Company and the Holder will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or by the Holder and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; and provided further, however, that, in any such case: (i) no such Holder will

 

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be required to contribute any amount in excess of the net amount of proceeds of all such Shares offered and sold by such Holder pursuant to such registration statement and (ii) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

(e) “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity, or any department, agency or political subdivision thereof.

(f) The rights and obligations of the Company and the Selling Holders under this Section 6 shall survive the termination of this Agreement.

Section 7. Benefits and Termination of Registration Rights.

(a) The Holders may exercise the registration rights granted hereunder in such manner and proportions as they shall agree among themselves. The registration rights hereunder shall cease to apply to any particular Shares and such securities shall cease to be Shares when: (i) a registration statement with respect to the sale of such Shares shall have become effective under the Securities Act and such Shares shall have been disposed of in accordance with such registration statement; (ii) (x) as to Illumina, any other member of the Illumina Group or any Participating Bank, such Shares shall have been sold to the public pursuant to Rule 144 under the Securities Act (or any successor provision) (“Rule 144”) and (y) as to any other Holder not enumerated in the immediately preceding clause (x), such Shares may be sold to the public pursuant to Rule 144 without being subject to the volume or manner of sale limitations of such rule; (iii) such Shares shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company (if applicable) and subsequent public distribution of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force; or (iv) such Shares shall have ceased to be outstanding.

(b) If any Shares are held in non-certificated book-entry form and are subject to any stop transfer or similar instructions or restrictions, the Company shall, at the request of the applicable Holder, use commercially reasonable efforts to cause such stop transfer or similar instructions or restrictions to be promptly terminated and removed if (i) such Shares are registered for resale under the Securities Act, (ii) the applicable Holder provides the Company with reasonable assurance that such Shares can be sold, assigned or transferred pursuant to Rule 144(b)(1) or otherwise without registration under the applicable requirements of the Securities Act, including, if requested by the Company or its transfer agent, an opinion of Holder’s outside legal counsel, reasonably acceptable to the Company and its transfer agent, to such effect and (iii) the applicable Holder delivers to the Company a representation letter in form and substance reasonably acceptable to the Company agreeing that such Shares will be sold only under an effective registration statement or pursuant to Rule 144(b)(1) or otherwise without registration in compliance with an exemption under the Securities Act.

 

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Section 8. Registration Expenses. As used in this Agreement, the term “Registration Expenses” means all expenses incident to the Company’s performance of or compliance with the registration requirements set forth in this Agreement, including:

(a) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares to be disposed of;

(b) all expenses in connection with the preparation, printing and filing of the registration statement, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto and the mailing and delivering of copies thereof to the underwriters;

(c) the cost of printing and producing any agreements among underwriters, any underwriting agreements, any blue sky or legal investment memoranda, any selling agreements and any amendments thereto or other documents in connection with the offering, sale or delivery of the Shares to be disposed of;

(d) all registration, qualification and filing fees, including the filing fees incident to securing any required review by Nasdaq, and any other securities exchange on which the Common Stock is then traded or listed, of the terms of the sale of the Shares to be disposed of and the trading or listing of all such Shares on each such exchange;

(e) all expenses in connection with the qualification of the Shares to be disposed of for offering and sale under state or non-U.S. securities laws, including the fees and disbursements of counsel for the underwriters in connection with such qualification and in connection with any blue sky and legal investment surveys;

(f) all expenses and application fees incurred in connection with any filing with, and clearance of an offering by the Financial Industry Regulatory Authority, Inc.;

(g) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties);

(h) expenses incurred in connection with any road show presentation to potential investors;

(i) the costs of preparing stock certificates (if any);

(j) the costs and charges of the Company’s transfer agent and registrar; and

(k) the fees and disbursements of any custodians or agents.

Registration Expenses shall not include (i) underwriting discounts and underwriters’ commissions attributable to the Shares being registered for sale on behalf of the Selling Holders, which shall be paid by the Selling Holders, (ii) stock transfer taxes, which shall be paid by the Selling Holders and (iii) the fees, disbursements and expenses of the Selling Holders’ counsel and accountants in connection with the registration of the Shares to be disposed of under the Securities Act.

 

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Section 9. Voting Restrictions.

9.1. Voting of the Shares.

(a) From the date of the Distribution until the date that the Illumina Group ceases to own any Shares, Illumina shall, and shall cause each member of the Illumina Group to (in each case, to the extent that they own any Shares), be present, in person or by proxy, at each and every stockholder meeting of the Company, and otherwise to cause all Shares owned by them to be counted as present for purposes of establishing a quorum at any such meeting, and to vote or consent on any matter (including waivers of contractual or statutory rights), or cause to be voted or consented on any such matter, all such Shares in proportion to the votes cast by the other holders of the Common Stock on such matter.

(b) From the date of the Distribution until the date that the Illumina Group ceases to own any Shares, Illumina hereby grants, and shall cause each member of the Illumina Group (in each case, to the extent that they own any Shares) to grant, an irrevocable proxy, which shall be deemed coupled with an interest sufficient in law to support an irrevocable proxy to the Company or its designees, to vote, with respect to any matter, all Shares owned by them, in proportion to the votes cast by the other holders of the Common Stock on such matter; provided that (i) such proxy shall automatically be revoked as to a particular Share upon any sale, assignment or transfer of such Share from a member of the Illumina Group to a Person other than a member of the Illumina Group and (ii) nothing in this Section 9.1(b) shall limit or prohibit any such sale, assignment or transfer.

Section 10. Miscellaneous.

10.1. Reserved.

10.2. Nominees for Beneficial Owners. If Shares are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the Holder of such Shares for purposes of any request or other action by any Holder pursuant to this Agreement (or any determination of any number or percentage of shares constituting Shares held by any Holder contemplated by this Agreement); provided that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.

10.3. Counterparts. This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party and delivered to the other party. This Agreement may be executed by facsimile or PDF signature and a facsimile or PDF signature shall constitute an original for all purposes.

10.4. Entire Agreement. This Agreement, the Separation Agreement, all the other Ancillary Agreements (as defined in the Separation Agreement) and all other exhibits and schedules attached hereto and thereto contain the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the parties with respect to the subject matter hereof other than those set forth or referred to herein or therein. In the event of any conflict between or among such agreements as it relates to the sale or transfer of the Shares following the Distribution, this Agreement shall govern.

 

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10.5. Authority. Each of the parties hereto represents to the other that:

(a) it has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated; and

(b) this Agreement has been duly executed and delivered by it and constitutes, or will constitute, a valid and binding agreement of it enforceable in accordance with the terms thereof; and

(c) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

10.6. Governing Law; Dispute Resolution. (a) This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

(b) In the event of any dispute arising under this Agreement between the parties (a “Dispute”), prior to bringing an Action (as defined in the Separation Agreement) relating to a Dispute, the parties shall first seek to settle amicably all Disputes by negotiation. The parties shall first attempt in good faith to resolve the Dispute by negotiation in the normal course of business at the operational level within 30 days after written notice is received by either party regarding the existence of a Dispute (the “Initial Notice”). If the parties are unable to resolve the Dispute within such 30-day period, the parties shall then attempt in good faith to resolve the Dispute by negotiation between executives designated by the parties who hold, at a minimum, the office of Senior Vice President and/or General Counsel (such designated executives, the “Dispute Committee”). The parties agree that the members of the Dispute Committee shall have full and complete authority on behalf of their respective parties to resolve any Disputes submitted pursuant to this Section 10.6(b). Such Dispute Committee members and other applicable executives shall meet in person or by teleconference or video conference within 30 days of the date of the Initial Notice to seek a resolution of the Dispute. In the event that the Dispute Committee and other applicable executives are unable to agree to a format for such meeting, the meeting shall be convened in person at a mutually acceptable location in San Diego, California.

 

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10.7. Arbitration.

(a) Any Dispute not finally resolved pursuant to Section 10.6(b) within 60 days from the delivery of the Initial Notice shall be resolved by binding arbitration in accordance with this Section 10.7. Any Dispute subject to arbitration pursuant to this Section 10.7 shall be determined and resolved by final and binding arbitration, the seat of which shall be in New York, New York, before a panel of three arbitrators. The arbitration shall proceed in accordance with and shall be governed by the Commercial Arbitration Rules (the “AAA Rules”) of the American Arbitration Association (“AAA”) then in effect. The claimant shall nominate one arbitrator and the respondent shall nominate one arbitrator within the time limits specified in the AAA Rules. The chairperson shall be nominated by the two appointed arbitrators within 15 Business Days of the appointment of the second arbitrator, failing which the chairperson shall be appointed by the AAA. Unless the parties to the arbitration otherwise agree in writing, the arbitrators so selected shall be independent and shall not have any material past or existing affiliation with any party.

(b) The arbitrators shall apply the governing law set forth in Section 10.6(a) and shall have authority to entertain a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Unless otherwise agreed by the parties in writing, discovery shall be limited to only: (i) documents directly related to the issues in controversy, (ii) no more than three depositions per party for any Dispute asserting claims exceeding $1 million (or equivalent value) or seeking injunctive relief, or two depositions per party for all other Disputes and (iii) 10 interrogatories per party. The arbitration procedures shall include provision for production of documents relevant to the Dispute; provided that all discovery, if any, shall be completed within 90 days of the appointment of the arbitrators or as soon as practicable thereafter.

(c) The provisions of this Section 10.7 are intended to provide the exclusive method of resolving any Dispute, including injunctive relief; provided, however, that a party may commence and prosecute an action in any court of competent jurisdiction for the purpose of enforcing or seeking to vacate an arbitration award hereunder.

(d) The agreement to arbitrate any Dispute set forth in this Section 10.7 shall continue in full force and effect subsequent to, and notwithstanding the completion, expiration or termination of, this Agreement.

(e) Each party shall bear its own costs of the arbitration and share equally the arbitrators’ fee and the administrative costs; provided that the prevailing party shall be entitled to payment of its reasonable attorneys’ fees and costs (unless applicable law restricts or prohibits such fee shifting).

(f) The parties undertake to keep confidential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in legal proceedings before a court or other judicial authority.

 

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(g) “Business Day” means any day that is not a Saturday, Sunday or any other day on which banking institutions located in New York, New York are required or authorized by law to be closed.

10.8. Assignment. This Agreement may not be assigned by any party hereto other than by Illumina to a Permitted Transferee as provided for in Section 2.5. Notwithstanding the foregoing, in any transaction as a result of which the Common Stock is converted into, or exchanged for, common stock or other securities of another Person, the Company shall cause such other Person to agree in writing to assume all of the Company’s rights and obligations under this Agreement. In addition, Illumina may assign this Agreement at any time in connection with a sale or acquisition of Illumina, whether by merger, consolidation, sale of all or substantially all of Illumina’s assets, or a similar transaction in which Illumina is not the surviving entity, without the consent of the Company, so long as the surviving entity assumes all the obligations of Illumina under this Agreement by operation of law or pursuant to an agreement in form and substance reasonable satisfactory to the Company. No assignment permitted by this Section 10.8 shall release the assigning party from liability for the full performance of its obligations under this Agreement.

10.9. Third-Party Beneficiaries. Except for the indemnification rights under this Agreement of any Holder Covered Person or Company Covered Person in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the parties hereto and are not intended to confer upon any Person (including any stockholders of Illumina or stockholders of the Company) except the parties hereto any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third Person (including any stockholders of Illumina or stockholders of the Company) with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

10.10. Notices. All notices, requests, claims, demands or other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by email with receipt confirmed, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.10):

If to Illumina, to:

Illumina, Inc.

5200 Illumina Way

San Diego, CA 92122

Attention:  Legal Department

Email:     legalnotices@illumina.com

 

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with a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Two Manhattan West

389 9th Avenue

New York, NY 10001

Attention:  Andrew J. Pitts

Ting S. Chen

Daniel J. Cerqueira

Email:     apitts@cravath.com

tchen@cravath.com

dcerqueira@cravath.com

If to the Company, to:

GRAIL, LLC

1525 O’Brien Drive

Menlo Park, California 94025

Attention:  Bob Ragusa

Aaron Freidin

Abram Barth

Don Lang

Email:     bragusa@grailbio.com

afreidin@grailbio.com

abarth@grailbio.com

dlang@grailbio.com

with a copy (which shall not constitute notice) to:

Latham & Watkins LLP

355 South Grand Avenue, Suite 100

Los Angeles, CA 90071

Attention:  W. Alex Voxman

Andrew Clark

Ross McAloon

Alexa Berlin

Email:     alex.voxman@lw.com

andrew.clark@lw.com

ross.mcaloon@lw.com

alexa.berlin@lw.com

Any party may, by notice to the other party, change the address and contact person to which any such notices are to be given.

 

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10.11. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties.

10.12. Waivers of Default. Waiver by a party of any default by the other party of any provision of this Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of the other party. No failure or delay by a party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

10.13. Specific Performance. Subject to Section 10.6(b), in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties.

10.14. Amendments; Waivers. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by a party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party against whom it sought to enforce such waiver, amendment, supplement or modification is sought to be enforced.

10.15. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

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10.16. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO OR ARISING FROM THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.16.

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date and year first written above.

 

[Signature Page to Registration Rights Agreement]

Exhibit 10.4

EXECUTION VERSION

Certain information has been excluded from this agreement (indicated by “[***]”) because

such information is both (a) not material and (b) is the type that the registrant customarily

and actually treats as private or confidential.

FOURTH AMENDMENT TO

AMENDED AND RESTATED SUPPLY AND COMMERCIALIZATION AGREEMENT

This Fourth Amendment to the Amended and Restated Supply and Commercialization Agreement (this “Fourth Amendment”) is entered into between Illumina, Inc., a Delaware corporation having a place of business at 5200 Illumina Way, San Diego, CA 92122 (“Illumina”), and GRAIL, LLC, a Delaware limited liability company (successor in interest to GRAIL, Inc.), having a place of business at 1525 O’Brien Drive, Menlo Park, CA 94025 (“GRAIL”), effective as of June 21, 2024, (“Fourth Amendment Effective Date”). The Parties previously entered into that certain Amended and Restated Supply and Commercialization Agreement effective as of February 28, 2017 (the “Original A&R Agreement”), as amended by the First Amendment to Amended and Restated Supply and Commercialization Agreement effective as of September 27, 2017 (the “First Amendment”), the Second Amendment to Amended and Restated Supply and Commercialization Agreement effective as of August 18, 2021 (the “Second Amendment”) and the Third Amendment to Amended and Restated Supply and Commercialization Agreement effective as of May 18, 2023 (the “Third Amendment”) (collectively, the Original A&R Agreement, the First Amendment, the Second Amendment and the Third Amendment, the “Agreement”). GRAIL and Illumina may be referred to herein individually as a “Party” or collectively as the “Parties.”

 

1.	Section 4.2(b) of the Agreement shall be amended and restated in its entirety with the following:

“Once GRAIL and its Operational Affiliates have cumulatively paid (or been deemed to have paid pursuant to the following sentence) Royalty to Illumina totaling $[***], the Royalty percentage payable pursuant to Sections 4.1(a) and 4.1(b) above will thereafter be reduced to a minimum floor of [***]%, without any further reduction pursuant to Section 4.2(a) or 4.3 or otherwise. Notwithstanding anything to the contrary in this Agreement, the amount of any Royalties that would have been paid to Illumina pursuant to Sections 4.1(a) and 4.1(b) during the Interim Period but for the suspension of such payment obligation shall be deemed to have been paid for purposes of this Section 4.2(b) and shall count towards the $[***] cumulative total set forth in this Section 4.2(b).”

 

2.	The Parties hereby amend the Agreement by adding the following paragraph to the Agreement as a new Section 4.8:

“With respect to Sections 4.1 through 4.4, 4.5(b) and 4.7, notwithstanding any provision to the contrary in the Agreement, during the Disposal Funding Period until and unless GRAIL consummates a GRAIL Change of Control (such period ending on the earlier of (x) the conclusion of the Disposal Funding Period and (y) the consummation of a GRAIL Change of Control, the “Interim Period”): all (i) rights of either Party set forth in Sections 4.1 through 4.4, 4.5(b) and 4.7 are hereby waived in their entirety, and (ii) obligations of either Party set forth

therein are hereby suspended in their entirety. For the avoidance of doubt, following the Interim Period Sections 4.1 through 4.4, 4.5(b) and 4.7 will again become operative without retroactive effect. The Parties hereto acknowledge that the decision adopted by the European Commission in connection with Case M.10939, on October 12, 2023, requiring Illumina to divest the ownership interest it acquired in GRAIL, requires that Illumina pre-fund to GRAIL the amounts payable pursuant to Sections 4.1 through 4.4, 4.5(b) and 4.7 of the Agreement during the Interim Period and agree that it is the intent of the Parties hereto that the waiver of the rights and obligations of the Parties with respect to Sections 4.1 through 4.4, 4.5(b) and 4.7 of the Agreement set forth in the preceding sentence operate to eliminate the administration associated with such funding (rather than replace, reduce, modify or eliminate the obligations therein). As such, notwithstanding anything to the contrary in this Agreement, during the Interim Period the Parties hereto acknowledge and agree that (i) the amounts payable pursuant to Sections 4.1 through 4.7 will be deemed paid by GRAIL for purposes of Paragraph 2 of the Second Amendment and accordingly (ii) Section 4 of the Agreement will be deemed operative for purposes of Paragraph 2 of the Second Amendment effective as of the Fourth Amendment Effective Date. During the Interim Period, any references in Section 4.5(a) or 4.6 to any amounts paid, underpaid or overpaid shall be treated as having been deemed paid, underpaid or overpaid, respectively, in accordance with Section 4.2(b) (as amended by the Fourth Amendment). For the purposes of this Section 4.8, “Disposal Funding Period” shall mean: the period beginning at 12:01 a.m., New York time, or such other time as Illumina determines, on the date on which Illumina distributes 85.5% of the issued and outstanding shares of common stock of GRAIL to the holders of common stock of Illumina and ending at 12:01 a.m., New York time, on the 30-month anniversary thereof. For the purposes of this Section 4.8, “GRAIL Change of Control” shall mean: (a) the taking of any action by any Person or “group” (within the meaning of the Exchange Act) that results in such Person or “group” becoming the owner, directly or indirectly, beneficially or of record, of outstanding shares of capital stock or other equity or voting interests representing 50% or more of the aggregate voting power of GRAIL (measured by voting power rather than number of shares), (b) the direct or indirect sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of GRAIL and its subsidiaries, taken as a whole, other than sales, leases, transfers, conveyances or other dispositions to a wholly-owned subsidiary of GRAIL, (c) a merger, consolidation, amalgamation, share exchange, business combination, recapitalization or similar transaction involving GRAIL pursuant to which any of the outstanding aggregate voting power of GRAIL is converted into or exchanged for cash, securities or other property, other than any such transaction where the aggregate voting power of GRAIL outstanding immediately prior to such transaction constitute, or is converted into or exchanged for, a majority of the outstanding aggregate voting power of the surviving person or any direct or indirect parent company of the surviving person immediately after giving effect to such transaction (measured by voting power rather than number of shares) or (d) the adoption of a plan relating to the liquidation or dissolution of GRAIL; provided that, for the avoidance of doubt, no GRAIL Change of Control shall result from any transfer of Retained Stock by Illumina to a Person or “group” (within the meaning of the Exchange Act) which would result in such Person or “group” beneficially owning 50% or more of the aggregate voting power of GRAIL (measured by voting power rather than number of shares) other than any transfer resulting from a merger of GRAIL. For the purposes of this Section 4.8, “Exchange Act” means the U.S. Securities Exchange Act of 1934, together with the rules and regulations promulgated thereunder, as the same shall be in

effect at the time reference is made thereto; “Person” means individual, general or limited partnership, corporation, business trust, joint venture, association, company, limited liability company, unincorporated organization, a limited liability entity, any other entity and any nation or government, any state, province, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, provincial, regional, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any official thereof; and “Retained Stock” shall have the meaning set forth in the Separation and Distribution Agreement, dated as of June 21, 2024, by and between Illumina and GRAIL.”

Except as expressly modified herein, the Agreement shall remain in full force and effect in accordance with its terms. All capitalized terms not defined in this Fourth Amendment shall have the meaning ascribed to them in the Agreement. This Fourth Amendment may be executed in one or more counterparts, and each of which shall be deemed to be an original, and all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties hereto have caused this Fourth Amendment to be executed by their respective duly authorized representatives.

 

GRAIL, LLC:						Illumina, Inc.:
By:		/s/ Robert Ragusa				By:		/s/ Charles Dadswell
Name:		Robert Ragusa				Name:		Charles Dadswell
Title:		Chief Executive Officer				Title:		General Counsel and Secretary
Date:		06/21/2024				Date:		06/21/2024