Marketing and Distribution Agreement - Applera Corp., the Applied Biosystems Group of Applera and the Celera Genomics Group of Applera
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CELERA GENOMICS/APPLIED BIOSYSTEMS
MARKETING
AND
DISTRIBUTION AGREEMENT
EFFECTIVE AS OF APRIL 1, 2002
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MARKETING AND DISTRIBUTION AGREEMENT
MARKETING AND DISTRIBUTION AGREEMENT (this "Agreement"), dated
as of February 27, 2003, and effective as of the 1st day of April, 2002
("Effective Date"), by and among Applera Corporation ("Applera"), the Applied
Biosystems Group of Applera ("AB"), and the Celera Genomics Group of Applera
("Celera").
WHEREAS, Celera has developed a business based on the
generation and sale of human genomic and other biological and medical
information (the "Online/Information Business," which term does not include
Celera's proteomics efforts or facilities); and
WHEREAS, the Online/Information Business is evolving rapidly
and somewhat unpredictably, particularly due to the role being played by the
public sequencing effort; and
WHEREAS, Celera management believes that additional value
could be obtained from the Online/Information Business if Celera's information
were provided as an integral part of a discovery or knowledge platform broader
than Celera's current platform and if such information were distributed by an
established sales and marketing organization with broader and deeper market
penetration than Celera currently has; and
WHEREAS, management representatives from both Celera and AB
have met extensively to discuss strategic alternatives for the
Online/Information Business, including alternatives for downstream, value-added
products; and
WHEREAS, AB is a leading supplier of assays, reagents, and
systems to the genomics and biotechnology markets, having perhaps the premier
marketing/distribution organization for such markets in the world; and
WHEREAS, AB desires to expand its current assays, reagents,
and systems business by incorporating the data and information developed
through, and by utilizing the technology developed for, the Online/Information
Business, where both AB and Celera believe that value-added commercial
opportunities will be greatly enhanced by Celera's information; and
WHEREAS, Celera intends to focus its future efforts in the
therapeutics business, and desires to retain its continuing access to genomic
and other biological and medical information of the Online/Information Business
without having to incur the investments required to enhance its world-class
marketing/distribution organization or transform the Online/Information Business
to meet the unpredictable and potentially shifting market demands; and
WHEREAS, management representatives from Celera and AB have
agreed that each of their Group's interests will be served best by collaborating
with respect to both marketing/distribution of Celera's information as well as
future investments relating to the Online/Information Business; and
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WHEREAS, the Board of Directors of Applera (the "Applera
Board") has determined that it is appropriate and in the best interest of
Applera and its stockholders to establish a marketing and distribution
relationship between AB and Celera whereby AB would market and distribute, as
part of a new information business, the data and information developed through
the Online/Information Business;
WHEREAS, based on the Applera Board approval referred to
above, AB and Celera agreed upon the principal terms and conditions of the
aforementioned marketing and distribution relationship, and have been operating
under such agreement, effective as of April 1, 2002; and
WHEREAS, the parties hereto desire to formalize the
aforementioned marketing and distribution agreement in a written agreement.
NOW, THEREFORE, the parties hereto agree to the Terms and
Conditions described in Annex A attached hereto, which shall be deemed effective
as of the Effective Date.
IN WITNESS WHEREOF, the parties agree to the foregoing as of
the date written above.
APPLERA CORPORATION
By: /s/ Tony L. White
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Name: Tony L. White
Title: Chairman, President and
Chief Executive Officer
APPLIED BIOSYSTEMS GROUP OF
APPLERA CORPORATION
By: /s/ Michael W. Hunkapiller
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Name: Michael W. Hunkapiller
Title: President
CELERA GENOMICS GROUP OF
APPLERA CORPORATION
By: /s/ Kathy Ordonez
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Name: Kathy Ordonez
Title: President
-2-
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ANNEX A
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TERMS AND CONDITIONS OF
MARKETING AND DISTRIBUTION AGREEMENT
1. Principles.
1.1 AB's Knowledge Business. AB is developing a new business (the
"Knowledge Business") comprising genomic and biological content,
assays, reagents for use in combination with oligonucleotide arrays,
services, experimental protocols, algorithms, and software
(collectively, "Knowledge Products"). As part of the Knowledge
Business, AB intends to develop and implement a portal for the
integration, delivery, and presentation of biological information and
products to enable scientific discovery by life sciences customers
(the "Portal"). The Portal will incorporate Celera's existing Celera
Discovery System ("CDS") infrastructure.
1.2 Products. This Agreement covers AB's development, marketing, and
distribution of the following products to be included within the
Knowledge Business ("Covered Products"):
(a) CDS and the datasets of Celera's Online/Information Business, in
all formats, and including all analysis tools, software, and
related information provided to former or current customers of
the Online/Information Business, including any future versions or
updates to such that are required by Committed Contracts, as that
term is defined in Section 3.1 below ("Existing Information
Products");
(b) Probes, primer sets, or oligonucleotide arrays, each that are
designed with reference to information included within the
Online/Information Business, and new Portal subscription business
marketed by AB as part of the Knowledge Business ("Related
Products") (for the avoidance of doubt, Portal subscriptions
which do not constitute Committed Contracts under Section 3.1 or
3.2, and which are not renewals or modifications of Committed
Contracts under Section 3.3, shall constitute new Portal
subscription business); and
(c) Other Knowledge Products developed at AB's expense after the
Effective Date ("Future Products").
(1) AB and Celera shall collaborate with respect to the
development of Future Products; and
Annex A-1
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(2) AB and Celera shall agree on the budget for new research and
development initiatives, and unless otherwise agreed, the
costs shall be borne by AB.
1.3 AB's Access to Celera IP. Subject to Section 6 below, AB shall have
unrestricted and exclusive access to and use of the intellectual
property associated with Existing Information Products for the
development and marketing of Knowledge Products, provided that such
access shall be on an "as is" basis with no recourse to Celera.
1.4 Ownership of Existing Online/Information Business Assets. Celera shall
retain ownership of the assets, including intellectual property,
relating to Existing Information Products.
1.5 Ownership of Improvements. Improvements to Existing Information
Products shall be owned by the party funding such improvements,
provided that at the end of the Term of this Agreement Celera shall
have the right to purchase any such improvements owned by AB at fair
value as determined by the Applera Board. Celera shall have 6 months
following the end of the Term to exercise such right.
1.6 Competition. Consistent with Applera's tracking stock principles,
neither AB nor Celera shall engage in each other's principal business
except to the extent provided herein.
2. Conduct and Relationship of the Parties.
2.1 Cooperation between AB and Celera. The parties believe that the
successful implementation of this Agreement will require close
cooperation between AB and Celera. In particular, the parties expect
that the relationship established by this Agreement will benefit from
the application of both AB's and Celera's respective resources and
expertise relating to Knowledge Products. However, the parties also
acknowledge that Celera nonetheless must continue to have sufficient
resources dedicated to the performance of its obligations under this
Agreement, including particularly its obligations in respect of
Committed Contracts (as defined below). Therefore, AB and Celera shall
cooperate and use reasonable commercial efforts to ensure that their
resources and expertise are applied in a manner that effectively
achieves the purposes of this Agreement without interfering with the
respective businesses of AB and Celera and their other obligations
under this Agreement (the "Cooperation Guidelines").
Annex A-2
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2.2 Online/Information Business Personnel. The parties believe that the
Knowledge Business will benefit from the unique expertise that certain
Celera personnel have developed from their involvement with the
Online/Information Business. Accordingly, the parties anticipate that
the cooperation referred to in Section 2.1 will involve, among other
things, the dedication of some or all of the time of various
Online/Information Business personnel to the Knowledge Business. The
cost of such personnel shall be paid by AB as contemplated by Section
4.2. In performing services for the Knowledge Business, the
Online/Information Business personnel may report to, and be subject to
the supervision of, Knowledge Business personnel. However, such
Online/Information Business Personnel and services shall at all times
remain subject to the Cooperation Guidelines.
2.3 Operating Procedures. The parties acknowledge and agree that it may be
appropriate from time to time to establish specific operating
procedures with respect to the allocation of resources contemplated by
Section 2.1 and the activities of the Online/Information Business
personnel contemplated by Section 2.2. Accordingly, the Inter-Group
Policy Committee (as defined in Section 8), working with AB and
Celera, shall periodically (and upon request of a party) evaluate the
need for, and if applicable adopt (and amend as necessary), operating
procedures for the relationship established by this Agreement
consistent with its terms (including specifically the Cooperation
Guidelines).
2.4 Use of Celera Name. AB's use of the "Celera" name in the marketing and
distribution by AB of Knowledge Products shall be subject to Celera's
approval.
3. Committed Contracts.
3.1 Committed Contracts. Celera shall continue to be responsible for the
performance of its obligations under all contracts relating to
Existing Information Products in effect as of the Effective Date (the
"Committed Contracts"), and shall receive all revenues and other
benefits under, and be responsible for all costs and expenses
associated with, such Committed Contracts.
Annex A-3
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3.2 Transition Period. Notwithstanding anything to the contrary contained
in this Agreement, commencing as of the Effective Date and continuing
for a period of three months thereafter (the "Transition Period"), all
revenues and other benefits under, and all costs and expenses
associated with, any contract for Existing Information Products
entered into during the Transition Period shall be allocated to
Celera, and Celera shall be responsible for the performance thereof.
Any such contract entered into during the Transition Period shall be
deemed a Committed Contract for purposes of this Agreement.
Notwithstanding Section 1.3 above, during the Transition Period Celera
shall be permitted to market Existing Information Products and
associated services.
3.3 Renewals of and Modifications to Committed Contracts. All revenues and
other benefits under, and all costs and expenses associated with, any
renewals of and/or modifications to Committed Contracts shall be
allocated to Celera, and Celera shall be responsible for the
performance thereof. All such renewals of and modifications to
Committed Contracts shall be deemed Committed Contracts for purposes
of this Agreement. For these purposes:
(a) Contractual arrangements with a Committed Contracts customer
entered into after June 30, 2002, will be treated as a renewal of
and/or modification to the original Committed Contract with that
customer, rather than a new Knowledge Business contract, only if
the nature of the subsequent contractual arrangement with the
customer is substantially the same as the nature of the original
Committed Contract.
(b) Without limitation, if (i) a renewal or modification of a
Committed Contract is entered into as a result of AB's marketing
efforts, and (ii) such renewal or modification involves the
addition of new subscribers to CDS, then the nature of the
subsequent contractual arrangement with the customer shall be
deemed different from the nature of the original Committed
Contract, and the renewed or modified contract shall not
constitute a Committed Contract hereunder as of effectiveness of
such renewal or modification.
Annex A-4
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(c) Any question regarding the application of this Section 3 shall be
subject to interpretation and resolution in accordance with
Section 8. The interpretation of the guidelines set forth above
and their application to specific factual circumstances shall be
guided by the general principle that Celera or AB, as the case
may be, should receive attribution for business actually
generated. In furtherance of this general principle, the
Inter-Group Policy Committee (or the Applera Chief Executive
Officer or Applera Board, as applicable) may determine that a
particular contract may have both a Committed Contract component
and new Knowledge Business contract component.
3.4 EBITDA From Committed Contracts. AB shall reimburse Celera for any
shortfall in Celera's projected total cumulative EBITDA of $62.5
million from Committed Contracts for fiscal years 2003 through 2006
(the "EBITDA Projection") caused by (i) any actions taken by AB in
connection with the Knowledge Business or (ii) actual changes to
Celera's current strategy for marketing and distribution of Existing
Information Products requested by AB, subject to the following terms,
conditions, and limitations:
(a) AB's reimbursement obligation under this Section 3.4 shall
be limited to $62.5 million in the aggregate;
(b) AB's reimbursement obligation under this Section 3.4 shall
be subject to the condition that Celera shall perform all of
its obligations under the Committed Contracts, except where
its failure to perform is due to (i) actions taken or
changes requested by AB as provided above, or (ii) the
breach or non-performance by the other party to such
Committed Contract as a result of any actions taken or
changes requested by AB as provided above;
(c) For purposes of making determinations under this Section
3.4, no less frequently than annually the parties shall
review and, as necessary, revise the 4 year forecast for
EBITDA from Committed Contracts (though no such revision to
the EBITDA forecast shall affect the EBITDA Projection on
which AB's obligations are based under this Section 3.4);
(d) Reimbursements by AB shall be made at the end of any quarter
if it is determined, and agreed to by AB and Celera, that AB
would have to recognize a reimbursement obligation on its
financial statements for that quarter; and
Annex A-5
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(e) Determinations and interpretations under this Section 3.4
shall be made pursuant to Section 8 and shall be consistent
with the financial model presented to the Applera Board that
corresponds to the EBITDA Projection.
4. Financial Provisions Applicable to Related Products.
4.1 Royalty to Celera for Covered Products.
(a) In exchange for marketing and distribution rights for
Covered Products as described in Section 1 above, AB shall
pay Celera a royalty quarterly through AB's 2012 fiscal year
based on revenues from Related Products. The royalty shall
be as heretofore approved by the Applera Board, subject to
such amendments as the Applera Board shall from time to time
approve.
(b) The royalty arrangement contemplated by Section 4.1(a) is
based on the mutual understanding that AB does not currently
intend to bundle Covered Products with other products and
services. If such bundling occurs, then the Inter-Group
Policy Committee shall approve an alternative financial
arrangement for such bundled Covered Products designed, to
the maximum extent possible, to give to Celera substantially
the same economic benefit from those Covered Products as was
originally intended by the parties, and to minimize any
adverse financial impact to Celera as a result of such
bundling of products.
4.2 Reimbursement of Costs. AB shall reimburse Celera for all costs
relating to the Knowledge Business (i.e., of the type or nature
identified in the financial model referred to in Section 3.4(e)) in
excess of the costs associated with Committed Contracts in a manner
consistent with Applera's tracking stock principles.
5. Shared Services. Celera and AB shall provide each other with access to
information technology, informatics, and other shared resources in a manner
consistent with Applera's tracking stock principles, as determined by the
Inter-Group Policy Committee (as defined in, and subject to the provisions
of, Section 8 below), to ensure the availability of these resources as
needed for purposes of this Agreement.
6. Effect on Other Operations/Arrangements.
6.1 Celera.
(a) Celera shall continue to have unrestricted access to:
Annex A-6
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(1) data (i.e., subscription content as well as underlying data
related to Covered Products) and other intellectual property
associated with the Knowledge Business for internal
therapeutics uses (including for collaborations with third
parties), as well as for other uses where AB declines
interest, without royalty or other payment obligations; and
(2) therapeutic targets identified through AB funded research
and development consistent with Applera's tracking stock
principles.
(b) Celera shall remain obligated to comply with obligations pursuant
to existing collaborations, subject to future modification and
amendment.
6.2 AB.
Access to Celera proteomics data shall be at the discretion of Celera.
6.3 Celera Diagnostics.
This Agreement shall not have any effect on the rights or obligations
of Celera Diagnostics within Applera. Celera Diagnostics shall
continue to have access to the intellectual property of Celera and AB
for human in-vitro diagnostics as set forth in the Celera Diagnostics
Joint Venture Agreement.
6.4 Third Party Obligations. Notwithstanding anything to the contrary
contained herein, the provisions of this Agreement are subject to any
now existing or future obligations of Celera or AB to third parties
regarding the intellectual property or other data or information of
such third parties.
7. Term of Agreement; Right of First Refusal.
7.1 Term. This Agreement shall become effective as of the Effective Date
and shall terminate as of the close of business on June 30, 2012 (the
"Term"), provided, however, that (a) any amounts payable by AB to
Celera as of the termination date shall continue to be payable in
accordance with the terms of this Agreement and (b) Section 7.2 below
shall survive such termination.
Annex A-7
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7.2 Right of First Refusal. If, at any time during the 5 years following
the termination or expiration of this Agreement, Celera desires to
sell, liquidate, or otherwise dispose of all or a portion of the
assets associated with the Online/Information Business, it shall first
offer to sell such assets to AB. Thereafter, if AB desires to purchase
such assets, Celera and AB shall negotiate in good faith such sale for
a period of not less than 60 days. In the event that Celera and AB are
unable to reach agreement on the sale of such assets within such time
period, Celera may, within 60 days following the conclusion of
negotiations with AB, sell all of such assets proposed to be sold to a
third party on terms no less favorable to Celera in the aggregate than
the terms last proposed by AB, if any.
8. Interpretation of Agreement; Resolution of Disputes.
Subject to Section 10 below, it is the intent of the parties that all questions,
concerns, disputes, or other issues that may arise relating to this Agreement,
including interpretation of the Agreement, be subject to the same procedures and
processes currently used to resolve issues between AB and Celera within Applera.
These procedures and processes include the Applera Inter-Group Policy Committee
(the "Inter-Group Policy Committee," which term includes any processes or
procedures for resolution of issues between AB and Celera as may be applicable
from time to time, and any successor committees, processes, or procedures). The
Inter-Group Policy Committee shall also have such other specific
responsibilities in relation to this Agreement as are expressly set forth in the
other provisions of this Agreement. Any dispute, disagreement, deadlock, or
other issue or matter relating to this Agreement which cannot be so resolved or
addressed by the Inter-Group Policy Committee may be referred by the Applera
Chief Executive Officer to the Applera Board, and any resulting determination by
the Applera Board shall be binding on the parties. Without limitation of the
foregoing, the parties anticipate that the Inter-Group Policy Committee is the
most appropriate management committee to ensure compliance with the Cooperation
Guidelines, and they therefore expect such committee to have an active role in
evaluating such compliance and responding to any questions or concerns that may
be raised regarding same (and, if it deems appropriate, implementing procedures
as contemplated by Section 2.3 in response to those questions or concerns).
9. Amendment and Waiver.
Subject to Section 10 below, the terms and conditions contained in this
Agreement may be amended, and the conduct of the parties may deviate from such
terms and conditions, with the approval of the Inter-Group Policy Committee;
provided, however, that any amendment to this Agreement, upon receiving the
necessary approval, shall be in a written instrument signed by (a) AB, (b)
Celera, and (c) the Applera Chief Executive Officer.
Annex A-8
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10. Role of Applera Board.
Notwithstanding anything to the contrary contained herein, all matters relating
to this Agreement shall at all times remain within the purview of the Applera
Board, which shall have the authority to review such matters on its own
initiative. In addition, the Applera Chief Executive Officer may refer matters
relating to this Agreement to the Applera Board as he deems appropriate.
11. Transaction Expenses.
All out-of-pocket costs and expenses incurred by Applera or its affiliates in
connection with the negotiation and implementation of the arrangements provided
for herein shall be borne equally by AB and Celera.
Annex A-9