Joint Venture Agreement - Applera Corp., Applied Biosystems Group of Applera, Celera Genomics Group of Applera, Foster City Holdings LLC and Rockville Holdings LLC
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CELERA DIAGNOSTICS
JOINT VENTURE AGREEMENT
AS OF APRIL 1, 2001
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JOINT VENTURE AGREEMENT
JOINT VENTURE AGREEMENT (this "Agreement"), dated as of the
1st day of April, 2001, by and among Applera Corporation ("Applera"), the
Applied Biosystems Group of Applera ("ABI"), the Celera Genomics Group of
Applera ("CRA"), Foster City Holdings, LLC ("ABI LLC"), and Rockville Holdings,
LLC ("CRA LLC").
RECITALS
WHEREAS, effective as of December 1, 2000, Applera hired Kathy
Ordonez to lead a major initiative in diagnostics, with the expectation that
such initiative, although commenced within ABI, would be conducted with the
active participation of CRA; and
WHEREAS, the Board of Directors of Applera has determined that
it is appropriate and in the best interest of Applera and its stockholders that
such joint initiative be carried out in the form of a joint venture between ABI
and CRA on the terms and subject to the conditions set forth in this Agreement
(the "Joint Venture").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Formation. ABI and CRA hereby agree to the legal formation
of the Joint Venture, which Joint Venture shall be structured in the manner
described in Annex A attached hereto.
2. Name. The name of the Joint Venture shall be "Celera
Diagnostics, LLC." The Joint Venture shall be referred to as a joint venture
with Applied Biosystems.
3. Field. The business of the Joint Venture shall be limited
to the field as described in Annex B attached hereto (as such description may be
amended from time to time in accordance with this Agreement, the "JV Field").
4. Contributions. ABI agrees to make the contributions to the
Joint Venture as described in Annex C-1 attached hereto (the "Initial ABI
Contribution"), and CRA agrees to make the contributions to the Joint Venture as
described in Annex C-2 attached hereto (the "Initial CRA Contribution" and,
together with the Initial ABI Contribution, the "Initial Contributions").
5. Employees. The initial employees of the Joint Venture shall
be those employees of ABI identified on Annex D attached hereto (the
"Employees").
6. Terms and Conditions. The Terms and Conditions described in
Annex E attached hereto shall govern all other aspects of the Joint Venture.
<PAGE>
IN WITNESS WHEREOF, the parties agree to the foregoing as of
the date first 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/ J. Craig Venter
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Name: J. Craig Venter
Title: President and Chief Scientific
Officer
FOSTER CITY HOLDINGS, LLC
By: PE Corporation (NY), acting through the
Applied Biosystems Group, as the sole member
of Foster City Holdings, LLC
By: /s/ Michael W. Hunkapiller
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Name: Michael W. Hunkapiller
Title: President
ROCKVILLE HOLDINGS, LLC
By: PE Corporation (NY), acting through
the Celera Genomics Group, as the sole member of
Rockville Holdings, LLC
By: /s/ J. Craig Venter
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Name: J. Craig Venter
Title: President
<PAGE>
ANNEX A
JOINT VENTURE
FORMATION MECHANICS/STRUCTURE
--------------------- -----------------------
PE Corporation (NY) PE Corporation (NY)
acting through the 2 acting through the
Applied Biosystems ---------------- Celera Genomics Group
Group
--------------------- -----------------------
| |
| 100% | 100%
4 | Membership 4 | Membership
| Interest | Interest
| |
---------------------- -------------------------
1 Foster City Holdings, 3 Rockville Holdings, LLC 1
LLC ("ABI LLC") ---------------- ("CRA LLC")
---------------------- -------------------------
\ /
\ /
\ 4 4 /
Class A \ / Class B
Membership \ / Membership
Interest \ / Interest
\ /
-------------------------
Celera Diagnostics, LLC 1
("JV Company")
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-------------------------
1. CRA LLC and ABI LLC have been formed on behalf of PE Corporation (NY)
acting through CRA and ABI, respectively. The JV Company has been
formed on behalf of CRA LLC and ABI LLC.
2. PE Corporation (NY) acting through CRA and ABI, respectively, has
signed separate operating agreements as the sole member of CRA LLC and
ABI LLC, respectively, for the purposes of establishing CRA LLC and ABI
LLC as single member limited liability companies to be treated as pass
through entities for tax purposes and certain other ministerial
matters.
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3. ABI LLC and CRA LLC shall sign an operating agreement (the "JV
Operating Agreement") for the JV Company. Pursuant to this operating
agreement, ABI LLC and CRA LLC shall own separate classes of membership
interests in the JV Company (to be designated as the Class A membership
interest and the Class B membership interest in the JV Company) with
the economic and voting rights specified therein, which shall embody
and/or incorporate by reference, as applicable, the relevant provisions
of this Agreement, including the Terms and Conditions of Joint Venture
specified in Annex E.
4. The Initial ABI Contribution and the Initial CRA Contribution shall be
contributed by ABI and CRA, respectively, to the JV Company through ABI
LLC and CRA LLC, respectively, as the Class A and Class B members of
the JV Company. Such contributions shall be deemed contributed to the
JV Company as of the date of this Agreement (the "Commencement Date"),
and accounted for as such in accordance with this Agreement as net
assets of the JV Company as of such date. This Agreement shall serve as
the legal transfer document, provided that if any further documentation
is legally required from time to time after the date hereof the parties
shall cooperate in implementing such documentation.
<PAGE>
ANNEX B
DESCRIPTION OF JV FIELD
The business of the Joint Venture shall be limited to the
field of Human In Vitro Diagnostics (HIVD). The HIVD field comprises products,
technologies, services, and/or processes for use in the measurement,
observation, or determination of attributes, characteristics, diseases, traits,
or other conditions:
o for medical management of a human being; and/or
o for quality control or testing of human blood or tissue
for transfusion or blood banking, bone marrow
transplantation or banking, or tissue typing for
transplantation..
Examples of activities in the HIVD field:
o Development, manufacture, or sale of anything labeled for
in vitro diagnostic use or any testing products labeled
for investigational use;
o Development, manufacture, or sale of products designated
as Analyte Specific Reagents (ASR's) by FDA or their
research use counterparts in Europe and Japan and general
purpose reagents (GPR's) that are specifically sold for
use with ASR's;
o Development and sale of software products for the
interpretation of data to provide an HIVD clinical test
result;
o Development, manufacture, and sale of products that convey
amplification, sequencing, or other patent rights in the
HIVD field, or products that are designated specifically
for use with products that convey amplification,
sequencing, or other patent rights in the HIVD field;
o Genetic testing for sample tracking in a clinical
laboratory;
o Sale of any in vitro testing products regulated by the
FDA, including products claimed to be produced under
cGMP to be sold to IVD companies or clinical testing
laboratories;
o In- and out-licensing or other transfer of patents,
technology, or know-how for HIVD use; and
o Development, manufacture, or sale of, or providing service
and support for, systems (reagents, components and/or
instruments) developed and manufactured for HIVD use or
developed specifically for use with ASRs (or their
counterparts outside the US).
Specific examples of activities not in the HIVD field:
o Development, manufacture, or sale of products or services
for basic and applied research, including clinical
research where the medical management of a patient is not
involved, unless the product or service is regulated as an
in vitro diagnostic test or ASR by the FDA;
<PAGE>
o Development, manufacture, or sale of products or services
for quality assurance and quality control, including
testing to determine conformance with specifications,
purity and batch-to-batch consistency, but excluding human
plasma or tissue-derived samples for the pharmaceuticals
industry;
o Testing of environmental samples, including the detection
of organisms, where the medical management of a human is
not involved;
o Identity testing applications for forensic purposes or
determination of paternity, excluding genotyping or other
identification testing for medical management of a human
being or sample tracking in a clinical laboratory;
o In vitro diagnostic testing of non-human (plant or
animal) samples, including animal breeding, pedigree
determination, or gender determination;
o Testing for the agricultural or food industries, including
the identification of genetically modified organisms
(GMOs) for these industries;
o Sale or service of general purpose ("open") instrument
systems or general purpose reagents, including enzymes,
unless sold in conjunction with ASRs or other products
regulated by the FDA;
o Sale of non-exclusive information products and services
not regulated by FDA (such as the Celera Discovery System)
to any customers, including those customers operating in
the HIVD field;
o Sale of anything labeled for Therapeutic or Prophylactic
use;
o Sale of products or services that convey therapeutic or
research patent rights; and
o In- and out- licensing or other transfer of patents,
technology or know-how for use in the therapeutic or
research fields.
<PAGE>
ANNEX C-1
INITIAL ABI CONTRIBUTION TO JOINT VENTURE
The Initial ABI Contribution shall consist of the following:
1. The ongoing commitment by ABI to pursue all opportunities within the JV
Field exclusively through the Joint Venture, pursuant to the terms of
this Agreement.
2. ABI's existing molecular diagnostics business unit headed by Kathy
Ordonez;
3. ABI's existing diagnostic sequencing business headed by Eric Shulse;
4 Rights under license with Roche to use PCR and ABI's instrumentation
platform in the human diagnostics field for the exclusive use by the JV
Company in the JV Field; as well as exclusive rights to all other
existing and future ABI patents, technology, and know-how in the JV
Field as more fully described in, and subject to the terms and
conditions of, Section 3.1(b) of Annex E to this Agreement;
5. On-going royalties payable to ABI under the terms of the License
Agreement between Visible Genetics and ABI;
6. ABI's agreement to fund 50% of the working capital and fixed capital
requirements of the Joint Venture as specified in Sections 2.3 and 7.3
of Annex E to this Agreement; and
7. ABI's agreement to reimburse CRA for tax benefits resulting from losses
generated by the JV Company as specified in Section 7.4 of Annex E to
this Agreement.
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ANNEX C-2
INITIAL CRA CONTRIBUTION TO JOINT VENTURE
The Initial CRA Contribution shall consist of the following:
1. The ongoing commitment by CRA to pursue all opportunities within the JV
Field exclusively through the Joint Venture, pursuant to the terms of
this Agreement.
2. Access to the Celera Discovery System and all databases, including
databases developed after the date hereof and during the term of the
Joint Venture; as well as exclusive rights to all existing and future
CRA patents, technology, and know-how in the JV Field as more fully
described in, and subject to the terms and conditions of, Section
3.1(b) of Annex E to this Agreement;
3. CRA's payment of certain amounts relating to the molecular diagnostics
initiative (primarily salaries) incurred from January 1, 2001, to March
31, 2001) under the terms of that certain Agreement dated as of March
30, 2001 between CRA and ABI (the "Prior Payment");
4. CRA's agreement to fund 50% of the working capital and fixed capital
requirements of the Joint Venture as specified in Sections 2.3 and 7.3
of Annex E to this Agreement; and
5. CRA's agreement to fund all of the cash operating losses of the Joint
Venture up to a maximum of $300 million (excluding those amounts
required for periodic working and fixed capital contributions which are
to be shared equally by ABI and CRA) and to absorb the full operating
losses of the Joint Venture in the manner specified in Sections 7.1(a)
and 7.3(a) of Annex E to this Agreement, subject to a credit for the
Prior Payment as specified in such Sections.
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ANNEX D
ABI EMPLOYEES INITIALLY TRANSFERRING TO THE JOINT VENTURE
[Intentionally omitted. The Company will furnish supplementally a copy of this
annex to the Securities and Exchange Commission upon request.]
<PAGE>
ANNEX E
TERMS AND CONDITIONS OF JOINT VENTURE
1. Joint Venture Business and Related Fundamental Principles
1.1 Scope of JV Company Business; Activities of ABI and CRA. The
business of the Joint Venture as conducted through the JV
Company shall be limited to the JV Field (which expressly
includes the right to conduct such business jointly with
collaboration partners). The JV Company shall not conduct any
business outside of the JV Field unless the JV Field
definition is amended to include such other business in
accordance with the terms and conditions contained herein.
Similarly, subject to Sections 1.4, 1.5, 3.3 and 3.4 below,
ABI and CRA shall engage in activities in the JV Field
(whether directly or indirectly through collaboration with
third parties) exclusively through the JV Company and shall
not conduct any business within the JV Field other than
through the JV Company. Subject to Sections 1.4, 1.5, 3.3 and
3.4 of this Annex, the Joint Venture shall collect all
revenues or other consideration from the sale of any products,
services, licenses, or technology transfers in the JV Field,
unless otherwise agreed by the JV Board.
1.2 Role within Applera Corporation. The following principles
shall govern the operation of the Joint Venture as a business
unit within Applera Corporation:
(a) As specified in further detail in Section 4 below, the
JV Company shall have its own board of managers (the "JV
Board") and management who shall be responsible for the
operation of the JV Company's business.
(b) The parties recognize that certain matters relating to
or affecting the JV Company may also relate to or affect
ABI or CRA. Therefore, as a general principle these
matters should be subject to the same procedures and
processes currently used to resolve issues between ABI
and CRA, with the understanding that the JV Company
would be included in those procedures and processes as
applied to such matters. 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
ABI and CRA, or among ABI, CRA, and the JV Company, as
may be applicable from time to time, and any successor
committees, processes, or procedures). This Annex E
specifies certain matters that must be reviewed by the
Inter-Group Policy Committee, but these matters should
not be viewed as exclusive.
Annex E-1
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(c) The parties also recognize that, since ABI, CRA, and the
JV Company operate under the authority of the Applera
Corporation Board of Directors (the "Applera Board"),
the terms, conditions, ownership, and operation of the
Joint Venture shall at all times remain subject to the
ultimate supervision of the Applera Board. Section 8
below outlines this principle in further detail, and in
particular identifies certain "Fundamental Changes"
which require the approval of the Applera Board.
(d) Within this framework, the parties anticipate that
disputes and disagreements can be minimized by
encouraging ongoing consultation and discussions among
the parties and by using formal processes and procedures
where necessary or appropriate. The parties shall
communicate regarding potential concerns before signing
agreements or committing to transactions, and are
encouraged to initiate dialogue, whenever there is
potential for conflict or disagreement even where this
potential is not deemed significant.
1.3 JV Field Definition and Interpretation. The JV Field
definition affects all parties, and therefore interpretation
and amendment of the definition shall be subject to the
approval of the Inter-Group Policy Committee (subject to the
oversight of the Applera Board as outlined in Section 8).
However, the JV Board, acting in consultation with JV Company
management, shall have the primary responsibility for
reviewing the JV Field definition from time to time and
recommending any proposed amendments to the Inter-Group Policy
Committee. Such review shall occur at least on an annual
basis, but shall also occur more frequently as circumstances
require, such as due to actual or anticipated technological
changes or evolution of the human in vitro diagnostics market,
with the goal of anticipating issues to minimize the
development of conflict. ABI and CRA may also make
recommendations to the Inter-Group Policy Committee from time
to time as they believe necessary or appropriate with respect
to the JV Field definition. Amendments approved by the
Inter-Group Policy Committee shall be binding on the parties
and shall be formally adopted as provided in Section 9 below.
Annex E-2
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1.4 Business Opportunities, Including New Technology and IP. If
either ABI or CRA identifies a business opportunity within the
JV Field (including any proposed acquisition of technology or
other intellectual property or improvements thereto with
applications within the JV Field as contemplated by Section
3.3), they shall present this opportunity to the JV Company.
Subject to the authority of the Applera Board as described in
Section 8 of this Annex E, it shall be within the sole
discretion of the JV Board as to whether or not the JV Company
shall pursue the business opportunity. If the JV Board makes a
determination that the JV Company will not pursue such a
business opportunity, then the party that identified the
opportunity shall be permitted to pursue such opportunity in
the JV Field on the terms and conditions approved by the
Inter-Group Policy Committee.
1.5 Certain Third Party Collaborations. Notwithstanding the
restriction in Section 1.1 above, the JV Company, ABI and CRA
may individually establish collaborations with third party
companies to conduct pharmacogenomic research. Such research
relates to the identification, analysis or validation of
surrogate markers for drug activation or drug metabolism, and
the determination or prediction of treatment response,
efficacy or adverse effects specifically in connection with
the development of a therapeutic regimen. The JV Company shall
have royalty-free access to all markers derived from any third
party collaboration for use in the JV Field, except for
royalties owed to third parties. The JV Company shall maintain
the exclusive right within Applera to commercialize any
analyte specific reagents and in vitro diagnostic products
resulting from any such third party collaboration.
Furthermore, the JV Company shall have the right of first
refusal within Applera to establish a third party
collaboration that involves the discovery of markers for use
in the JV Field. Notwithstanding anything herein to the
contrary, CRA shall retain the right to utilize such markers
in its clinical trial activities without compensation to the
JV Company. However, the JV Company may not establish a third
party collaboration that is specifically designed to identify
therapeutic targets. In cases where the third party
collaboration involves the discovery of both diagnostic and
therapeutic markers, the JV Company and another Applera
operating group would jointly establish the collaboration. The
Applera operating group establishing a third party
collaboration shall collect all revenues from that
collaboration. If more than one Applera operating group
participates in the collaboration, the revenues shall be
shared proportionately as agreed between them with the
approval of the Inter-Group Policy Committee.
Annex E-3
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2. Formation/Capitalization
2.1 Nature of Joint Venture; Ownership . The Joint Venture shall
be conducted by CRA and ABI through the JV Company. ABI and
CRA shall each own their respective interests in the JV
Company through ABI LLC and CRA LLC, respectively, which shall
own Class A and Class B membership interests, respectively, in
the JV Company. The economic and voting rights associated with
those two classes of membership interests are to be set forth
in the JV Operating Agreement, which shall have terms and
conditions which are not inconsistent with this Agreement. The
Class A and Class B membership interests in the JV Company
shall represent equal membership interests in the JV company
with respect to all matters (including voting and economic
rights) except as otherwise specifically provided in this
Agreement. ABI and CRA, as the Class A and Class B members,
respectively, of the JV Company, shall account for their
respective membership interests in the JV Company consistent
with the rights and obligations associated with those
interests pursuant to the JV Operating Agreement, which shall
embody and/or incorporate by reference the principles outlined
in Section 7 below.
2.2 Initial Capital Contributions. The Initial Contributions of
ABI through ABI LLC and CRA through CRA LLC to the JV Company
and the contribution mechanics are as described in Annexes A,
C-1, and C-2 attached hereto.
2.3 Future Capital Contributions. All future funding needs for the
JV Company shall be satisfied in accordance with Section 7.3
of this Annex subject to the following:
(a) The funding of the LLC pursuant to Section 7.3 shall not
alter ABI LLC's or CRA LLC's respective Class A or Class
B membership interest in the JV Company even though,
among other things, such provisions may require unequal
cash contributions to the JV Company, as the commitment
to make such contributions are part of the Initial
Contributions. The making of any contributions which
would cause deviation in the Class A or Class B
membership interests or the rights or obligations
associated with such interests as set forth in this
Annex is a Fundamental Change subject to Section 8
below.
(b) Except as set forth in this Agreement with respect to
the Initial Contributions, all contributions from the
parties shall be in the form of cash unless otherwise
approved by the JV Board. Non-cash contributions shall
be valued at the fair value of the property contributed
as determined by the Applera Board using outside
resources to the extent it deems necessary. For the
avoidance of doubt, it is understood that such valuation
is for purposes of determining the Class A and Class B
membership interests of each of ABI LLC and CRA LLC in
the JV Company and not for accounting purposes.
Annex E-4
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The JV Board shall review and approve the JV Company business
plan and corresponding budget (including fixed and working
capital requirements) prior to the commencement of each of its
fiscal years, and at such other times as the JV Board
determines from time to time.
3. Intellectual Property Matters
3.1 IP Contributions by ABI and CRA. The initial intellectual
property contributions of each of ABI and CRA to the JV
Company through ABI LLC and CRA LLC, respectively, include (a)
the intellectual property specifically set forth in Annexes
C-1 and C-2, and (b) subject to Section 3.4 below and subject
to the rights of third parties, exclusive rights to all
existing and future ABI and CRA patents, technology, and
know-how (including improvements and modifications thereto)
for applications within the JV Field. Subject to Sections 1.4
and 1.5 above and Sections 3.3 and 3.4 below, the JV Company
shall have the right to use such intellectual property within
the JV Field (including the right to license or sublicense
such intellectual property) without the payment of any license
fees or royalties to ABI or CRA but subject to the terms and
conditions, including royalty or license fee obligations,
owing to any third party in respect of such intellectual
property. ABI and CRA shall use their commercially reasonable
efforts to ensure that future contracts with third parties do
not contain restrictions that would restrict the JV Company's
access to and use of their intellectual property as
contemplated by this Section, and before entering into any
contract that contains such a restriction they shall obtain
the approval of the Inter-Group Policy Committee.
Annex E-5
<PAGE>
3.2 Rights to Technology Developed or Acquired by JV Company.
Subject to Sections 1.4 and 1.5 above, the JV Company shall
have the exclusive right to use intellectual property
developed or acquired by the JV Company within the JV Field.
Outside of the JV Field, subject to the rights of any third
party, any intellectual property developed or acquired by the
JV Company (a) may be used exclusively by ABI within the
research field without the payment of any license fees or
royalties to the JV Company, and (b) may be used exclusively
by CRA within the therapeutics field without the payment of
any license fees or royalties to the JV Company. The use of
any intellectual property developed by the JV Company in a
field of use not contemplated by this Section 3.2 shall be
determined by the Inter-Group Policy Committee. The foregoing
notwithstanding, the use of technology, know-how, information,
or data developed by the JV Company may be subjected to such
reasonable restrictions as the Inter-Group Policy Committee
may determine for purposes of securing necessary patent
protection, complying with JV Company obligations to third
parties, or maximizing the commercial value to Applera of the
technology, know-how, information, or data. The JV Company
shall use its commercially reasonable efforts to ensure that
future contracts with third parties do not contain
restrictions that would restrict ABI's or CRA's access to and
use of its intellectual property as contemplated by this
Section, and before entering into any contract that contains
such a restriction it shall obtain the approval of the
Inter-Group Policy Committee.
3.3 Rights to Third-Party Technology. ABI's or CRA's subsequent
acquisition of rights to technology or other intellectual
property or improvements thereto from a third party with
applications within the JV Field shall be subject to Section
1.4 above.
3.4 CRA's Existing Collaborations. The parties acknowledge that
CRA currently is a party to certain collaboration and other
agreements that, among other things, provide third parties
with access to certain CRA technology for use in certain
fields, including fields that would be considered within the
JV Field. Notwithstanding anything to the contrary contained
herein, these agreements and the transactions and
relationships established by them shall be deemed excluded
from the JV Field and the grant of rights to third parties
under these agreements shall not be a violation of this Joint
Venture Agreement if and to the extent that CRA is, under the
terms and conditions of such collaboration and other
agreements, prohibited from assigning them to the JV Company.
CRA and the JV Company will separately agree in writing on the
list of collaboration and other agreements that are covered by
the exception in this Section 3.4. For the avoidance of doubt,
it is understood that even if a collaboration or other
agreement is excluded under this Section 3.4, intellectual
property that CRA may derive from such agreement within the JV
Field shall be covered by Section 3.1 above, and will be
deemed contributed to the JV Company for its exclusive use
within the JV Field, unless prohibited under the terms of such
collaboration and other agreements.
Annex E-6
<PAGE>
3.5 Determinations. The applicability to the JV Field of
intellectual property that is subsequently created or acquired
by either ABI or CRA, as the case may be, shall be determined
by the Inter-Group Policy Committee as contemplated by Section
1.2 above.
4. Governance.
4.1 JV Board
The Joint Venture shall operate under the supervision of the
JV Board, which shall have the authority of a "manager" of a
limited liability company under the Limited Liability Company
Act of the State of Delaware, subject to the specific limits
set forth herein. The following provisions shall apply to the
JV Board:
(a) Composition. The JV Board shall have six (6) members,
consisting of:
(i) the Chief Executive Officer of Applera (the
"CEO"),
(ii) the JV President (as defined below),
(iii) one member appointed by ABI LLC as the Class A
member of the JV Company (the "ABI Nominee"),
(iv) one member appointed by CRA LLC as the Class B
member of the JV Company (the "CRA Nominee"),
(v) the Chief Financial Officer of Applera, and
(vi) the General Counsel of Applera,
The CEO shall be the Chairman of the JV Board.
ABI LLC and CRA LLC can remove and replace the
ABI Nominee and CRA Nominee appointed by them,
respectively, from time to time without
restriction. Any member of the JV Board who is
unable to attend a meeting of the JV Board may,
for that meeting, designate an alternate or
proxy to act on behalf of such member of the JV
Board, subject to approval of the CEO.
(b) Meetings. Meetings of the JV Board shall be held from
time to time as the parties deem necessary or as
required to take the actions specified herein, and as
may otherwise be requested from time to time by the CEO.
A quorum for meetings requires the presence of the ABI
Nominee, the CRA Nominee, the JV President, and the CEO
(or, if applicable, their designated alternates or
proxies).
Annex E-7
<PAGE>
(c) Voting. Approval of matters voted on by the JV Board at
meetings requires a vote of a majority of the entire JV
Board (regardless of who is present at a meeting);
provided, however, that (i) in the event of a tie vote
the CEO (or his designated alternate or proxy) shall
have a casting (i.e., tie-breaking) vote and (ii) in
lieu of exercising such casting vote, the CEO (or, if
applicable, his designated alternate or proxy) may
instead have the matter referred to and determined by
the Applera Board as contemplated by Section 8.3 below.
(d) No Fiduciary Duties. No members of the JV Board shall
have any fiduciary or similar duties to the members of
the JV Company, and are therefore free to vote in
accordance with instructions from the parties nominating
such members.
(e) Action By Written Consent. Notwithstanding the
foregoing, any action required or permitted to be taken
at any meeting of the JV Board may be taken without a
meeting if all members of the JV Board consent thereto
in writing.
(f) Indemnification. The JV Company shall indemnify and hold
harmless each member of the JV Board from and against
any and all claims and demands to the fullest extent
permitted by law and Applera's By-laws.
4.2 Joint Venture Management
The day-to-day operations of the Joint Venture shall be run by
a management team employed by, and dedicated to, the JV
Company under the management and direction of the JV Board.
Such management team shall be headed by a president (the "JV
President") who shall initially be Kathy Ordonez. The balance
of the management team, and the personnel filling management
positions, shall be determined from time to time by the JV
President under the supervision of the JV Board. The
management of the JV Company shall have such authority as the
JV Board shall from time to time delegate except that the JV
Company's management authority shall not extend to matters
requiring approval of the Applera Board or the Inter-Group
Policy Committee under the terms hereof.
5. Operations
5.1 Access to ABI and CRA Products and Services. From time to
time, the JV Company may require products and services of ABI
or CRA in addition to those products and services that
constitute the Initial Contributions. ABI and CRA, as
applicable, shall supply the JV Company with such products and
services on terms and conditions (including price) approved by
the Applera Board consistent with then applicable policies on
intra-company transactions. Such products and services will
not be treated as contributions to the JV Company through ABI
LLC or CRA LLC unless otherwise determined by the Applera
Board consistent with the principles set forth in this Annex.
Annex E-8
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5.2 Access to Corporate Overhead. The JV Company shall have access
to Applera's general corporate resources (including tax,
accounting and legal) in accordance with, and subject to,
Applera management allocation policies as in effect from time
to time. The JV Company shall incur an administrative charge
to its operations reflecting an allocation of corporate costs
as determined by the overall allocation formula (commonly
referred to as the "Four-Factor Allocation").
6. Employees and Benefits
6.1 Employees. The JV Company shall be staffed with employees who
are dedicated full time to the business of the JV Company. The
JV Company shall be prohibited from hiring employees of either
ABI or CRA without the consent of the affected group, except
that the employees identified on Annex D shall initially staff
the JV and no consent of ABI is required with respect to such
employees.
6.2 Compensation and Benefits. Subject to Section 4.1(c) and
subject also to any matters which by their own terms require
Applera Board approval (such as stock options), matters
relating to the compensation of JV Company personnel shall be
determined by management of the JV Company consistent with
Applera policies applicable to such matters as in effect from
time to time. JV Company personnel shall also be provided with
Applera benefits in accordance with applicable Applera
policies as in effect from time to time.
7. Tax/Accounting Matters
7.1 Joint Venture Losses. JV Company losses shall be for the
account of ABI LLC, as the Class A member of the JV Company,
and CRA LLC, as the Class B member of the JV Company (and
accordingly recorded by ABI or CRA, as applicable, on their
books), as follows:
(a) During the Initial Loss Period (as defined below), all
operating losses of the JV Company up to an aggregate
amount equal to $300 million (the "Initial Loss
Commitment") shall be allocated to CRA LLC, provided
that CRA LLC shall receive a credit under this clause
against the Initial Loss Commitment for the Prior
Payment (the aggregate operating losses allocated to CRA
LLC from time to time under this clause, including the
credit for the Prior Payment, is referred to herein as
the "Allocated Initial Losses"); and
Annex E-9
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(b) All operating losses of the JV Company above the Initial
Loss Commitment, or which occur after the Initial Loss
Period, shall be allocated 50% for the account of ABI
LLC and 50% for the account of CRA LLC (as the Class A
and Class B members, respectively, of the JV Company).
The "Initial Loss Period" shall mean the period beginning with
the formation of the Joint Venture and ending on the earliest
to occur of (i) the time at which Allocated Initial Losses
equal the Initial Loss Commitment, (ii) the last day of any
fiscal quarter during which the JV Company experiences gross
operating profits, if such fiscal quarter represents the
fourth of four consecutive fiscal quarters during which the JV
Company experiences gross operating profits. For these
purposes, the JV Company's operating results shall include all
items, except those deemed to be non-recurring in nature as
determined by the JV Board.
7.2 Joint Venture Profits. JV Company profits shall be for the
account of ABI LLC, as the Class A member of the JV Company,
and CRA LLC as the Class B member of the JV Company (and
accordingly recorded by ABI or CRA, as applicable, on their
books), as follows:
(a) All profits of the JV Company shall be allocated 65% for
the account of CRA LLC and 35% for the account of ABI
LLC until the cumulative profits of the JV Company equal
the Allocated Initial Losses; and
(b) All profits of the JV Company above the amount referred
to in clause (b) above shall be allocated to ABI LLC and
CRA LLC equally.
7.3 Cash Contributions.
(a) Cash operating losses of the JV Company shall be funded
by CRA LLC (as the Class B member of the JV Company) up
to the Initial Loss Commitment, subject to a [credit]
under this provision in an amount equal to the Prior
Payment. The amounts to be funded pursuant to the
following clauses (b) and (c) are incremental to this
amount.
(b) Working capital requirements of the JV Company shall be
funded by ABI LLC and CRA LLC (as the Class A and Class
B members, respectively, of the JV Company) equally.
Working capital shall be measured at the end of each
fiscal quarter as the cash flow impact of the change in
the current assets and liabilities of the JV Company.
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(c) Plant, property, and equipment ("fixed capital")
requirements of the JV Company shall be funded by ABI
LLC and CRA LLC (as the Class A and the Class B members,
respectively, of the JV Company) equally.
7.4 Reimbursement of Tax Benefits. If CRA LLC, as the Class B
member of the JV Company, assumes and CRA records on its books
JV Company losses as provided in Section 7.1 above, then ABI
shall reimburse CRA for any tax benefits resulting from such
losses or any other tax benefits generated by the JV Company
during the loss year to the extent that such benefits are
utilized by ABI.
7.5 Distributions On Liquidation. Upon a liquidation of the JV
Company business (which for these purposes includes a sale of
the business regardless of the legal structure of such
transaction), the assets of the JV Company (or, if applicable,
the proceeds of such sale) shall be allocated to ABI LLC and
CRA LLC as the Class A and Class B members of the JV Company
as follows (after payment of all of the JV Company's debts and
liabilities):
(a) First, to the extent of any such proceeds, to ABI LLC
and CRA LLC in an amount equal to the balance in their
respective shareholder equity accounts in the JV Company
(payable to them pro rata based on the amounts owing to
them under this clause (a) up to such amounts);
(b) Second, to the extent of any such proceeds after payment
of the amounts in clause (a) above, 65% to CRA LLC and
35% to ABI LLC until the cumulative amounts paid under
this clause (b), together with any cumulative profit
returned under Section 7.2(a), equals the Allocated
Initial Losses; and
(c) Third, to the extent of any remaining proceeds after
payments of the amounts referred to in clauses (a) and
(b) above, to ABI LLC and CRA LLC equally.
8. Matters Subject to Applera Board Approval or Review
8.1 Role of Applera Board. Notwithstanding anything to the
contrary contained herein, all matters relating to the JV
Company shall at all times remain within the purview of the
Applera Board, which shall have the authority to review
matters relating to the JV Company or the JV Board on its own
initiative and, if it deems appropriate, instruct the JV
Company or the JV Board regarding particular matters (in which
case the JV Company and the JV Board shall be bound to comply
with such instructions). Without limiting the foregoing, the
conduct of the business of ABI, CRA, ABI LLC, CRA LLC, and the
JV Company shall at all times remain subject to Applera
policies in effect from time to time.
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8.2 Fundamental Changes. Although the parties do not anticipate
any material alteration in the fundamental structure and
ownership of the JV Company for the foreseeable future, from
time to time circumstances may arise which warrant
consideration of such alterations ("Fundamental Changes").
Fundamental changes, defined to include the following matters,
require approval of the Applera Board:
(a) Terminating the Joint Venture by transferring its
business to either or both of ABI and/or CRA;
(b) Spinning off the JV Company into an independent
business;
(c) Altering the ownership of the JV Company between ABI and
CRA due to, for example, alterations in the rights or
obligations (including contribution commitments)
associated with their direct or indirect interests in
the JV Company as set forth in Section 7 above);
(d) Allowing a third party to participate in the JV Company,
including by way of a transfer by either or both of ABI
and/or CRA of its direct or indirect interest or by
contribution of new equity into the JV Company;
(e) Liquidating the JV Company in whole or in part by
disposing of some or all of its assets to a third party;
and
(f) Other matters identified by the CEO or the Applera Board
from time to time as Fundamental Changes.
8.3 Interpretation of Agreement; Resolution of Disputes. It is the
intent of the parties that, subject to the preceding
provisions of this Section 8, all issues relating to the JV
Company, including the interpretation of this Agreement, be
decided or resolved by the JV Board or, in the case of issues
which affect or relate to ABI or CRA (including, without
limitation, issues relating to the definition of the JV
Field), the Inter-Group Policy Committee. However, any
dispute, disagreement, or deadlock relating to the JV Company
which cannot be so resolved may be referred by the CEO to the
Applera Board, and any resulting determination by the Applera
Board shall be binding on the parties.
Annex E-12
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9. Amendment and Waiver
Subject to any approval of the Applera Board required under Section 8 of this
Annex, 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 ofthe 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) ABI and ABI LLC, (b) CRA and CRA LLC, and (c)
the CEO. In addition, if any provision of this Agreement specifies that the
approval or determination of the Applera Board is required for or with respect
to any matter, then such provision may not be amended, and the conduct of the
parties shall not deviate from such provision, without the approval of the
Applera Board.
Annex E-13