CRA » Topics » Operating Agreement

This excerpt taken from the CRA 10-K filed Sep 8, 2008.

Operating Agreement

The operating agreement includes operating principles that govern our and Applied Biosystems’ conduct concerning, and use of, specified instruments and other technologies used prior to the split-off by one or both of the Applied Biosystems and Celera Groups. A summary of these operating principles is set forth below.

Instruments. We will have continued access to Applied Biosystems’ current capillary electrophoresis, or CE, sequencers and associated consumables as they have been provided by Applied Biosystems in connection with the Abbott alliance. We will also have access to Applied Biosystems’ current and future CE sequencers and associated consumables in the same manner as other customers of Applied Biosystems. We expect to develop a new FDA-compliant diagnostic instrument based on Applied Biosystems’ CE technology. We will pay the costs of developing this new instrument, including any incremental costs incurred by Applied Biosystems.

Applied Biosystems is permitted to sell its CE sequencers to any end-user for any purpose. Applied Biosystems is also permitted to sell its CE sequencers as an original equipment manufacturer, or OEM, except that it will not be able to OEM the CE sequencers for commercialization of human diagnostic tests for specified conditions for a period of three years after the date of the split-off outside of Asia, Africa, the Middle East and South America. Applied Biosystems will generally not itself commercialize these same tests anywhere in the world, or enter into an agreement with a third party to co-promote or co-market CE sequencers to be used with these same tests outside of Asia, Africa, the Middle East and South America, for the same three-year period.

Applied Biosystems will be the preferred supplier of Celera’s next generation real-time instrument. If we and Applied Biosystems are unable to agree on terms for this instrument, we will be given access to Applied Biosystems’ intellectual property to the extent necessary to make or to have a next generation real-time system made for us by a third party.

There are no restrictions on development or commercialization of next generation sequencing instruments for either party.

Except for the restrictions under the supply agreement between Applied Biosystems and Abbott relating to the m2000TM system, Applied Biosystems is permitted to sell real-time instruments to any end user for any purpose. Except as provided under the Abbott supply arrangement, Applied Biosystems will not OEM real-time instruments to any third party for use in the human in vitro diagnostics, or HIVD, field unless the third party has obtained a license to Applied Biosystems real-time intellectual property in the HIVD field. However, the OEM customer can not commercialize human diagnostic tests for specified conditions on these instruments for a period of three years after the date of the split-off.

 

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Reagents. In general, Applied Biosystems will not knowingly commercialize any sequence-specific primers and probes

 

   

for incorporation by a third party product manufacturer into its human diagnostic products, or

 

   

to a clinical laboratory for performing “home-brew” human diagnostic testing

for performing testing for specified conditions for three years after the date of the split-off. This restriction does not apply to Asia, Africa, the Middle East or South America. In addition, Applied Biosystems will generally not itself commercialize, directly or through a distributor, analyte specific reagents, or ASRs, or human diagnostic kits for testing the same specified conditions for a period of three years after the date of the split-off.

We and Applied Biosystems have entered into a master purchase agreement for materials and other components used by us in products and services and in our research and development. For a more detailed description of the terms of the master purchase agreement, see below in this section under the heading “Agreements Between Applied Biosystems and Us Relating to the Split-Off — Master Purchase Agreement.”

Licensing. We and Applied Biosystems will work together in licensing specified Applied Biosystems intellectual property to third parties in the HIVD field. Revenues from these licenses will be shared equally between us and Applied Biosystems.

Other Provisions. Applied Biosystems will not have any rights to Celera’s proprietary diagnostic markers in the HIVD field, and there will be no restrictions on our ability to license our proprietary diagnostic marker intellectual property. We will not commercialize, directly or through a distributor, products in forensics and applied markets that incorporate intellectual property owned or controlled by Applied Biosystems, unless we obtain a license to the relevant intellectual property from Applied Biosystems on standard third-party terms.

In addition, the three-year time restrictions on Applied Biosystems described above would not apply to the commercialization of a competing product acquired as part of an acquisition of a third party by Applied Biosystems, nor would it prohibit an acquiror of Applied Biosystems from continuing to commercialize a competing product following an acquisition.

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