1
Certain portions of this Exhibit have been omitted based upon a request for
confidential treatment. The non-public information has been filed with the
Commission.
Exhibit 10.3
ADDENDUM TO RESTATED DEMEGEN-MYCOGEN
LICENSE AND ROYALTY AGREEMENT
This Addendum is made this 11th day of October, 1998 (the "Addendum
Effective Date"), by and between Demegen, Inc. ("Demegen") and Mycogen
Corporation ("Licensee").
WHEREAS, Demegen (formerly known as Demeter BioTechnologies, Ltd.) and
Mycogen are parties to that certain Restated Demegen-Mycogen License and Royalty
Agreement effective September 23, 1997, relating to an exclusive license of
certain biocontrol peptide technology by Demegen to Mycogen for disease control
in plants (the "Agreement"); and
WHEREAS, Mycogen was granted a first right of refusal under the
Agreement through October 1, 1998, to obtain an exclusive license to Demegen
Nutrition Patents and Technology (as defined therein); and
WHEREAS, Licensee desires to execute its right of first refusal and
obtain a license from Demegen for the Demegen Nutrition Patents and Technology
and Demegen desires to grant said license;
THEREFORE, in consideration of the mutual obligations set forth in this
Addendum, Demegen and Licensee agree as follows.
ARTICLE I. DEFINITIONS
A. All capitalized terms defined in the Agreement will have the same meanings as
set forth therein when used in this Addendum.
B. "Licensed Nutritional Plant Products" means transgenic plant(s) containing a
gene encoding for a nutritional protein the use of which either (i) involves the
use of technology included within Nutrition Patents and Technology; or (ii)
would otherwise infringe a valid claim of any applicable patent included within
Nutrition Patents and Technology absent the license granted under this Addendum.
The first sentence of this Paragraph B includes, but not limited to, plant(s)
which are induced to produce a nutritional protein (e.g., through the use of RNA
viral expression systems).
C. "Supplemental Nutrition Applications" means (i) the use of genes in plants to
produce amino acids or proteins for extraction and removal from all associated
plant material and subsequent sale of the purified amino acids or proteins for
nutrition purposes in animals, and (ii) the production of amino acids or
proteins in bacteria for extraction and inclusion for nutritional purposes in
animal feedstuff.
D. "Foundation" means the not-for-profit foundation being established by ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇ and/or Demegen for humanitarian purposes.
1
2
E. "Nutritional Field of Use" means the use of peptides to increase the protein
levels, or increase the levels of particular amino acids in transgenic plants or
the use of peptides to increase the bioavailability of proteins in plants when
these plants or plant parts are ingested by animals including, but not limited
to, humans and fish. This field of use does not include the field of
Supplemental Nutritional Applications.
F. "Cumulative Revenue Benchmark" means the actual receipt by Licensee and its
Affiliates of the sum of Twenty Million Dollars ($20,000,000) in the cumulative
aggregated Net Sales and Trait Marketing Income of a Crop species designated in
Paragraph E of Article IV.
G. "Addendum Effective Date" means the date on which this Addendum becomes
effective in accordance with Article XII.
H. The definition of Nutrition Patents and Technology is hereby amended to
exclude any technology, material and patents or patent applications acquired by
Demegen (other than by the development by Demegen) after the Addendum Effective
Date (the "After Acquired Nutritional Technology").
ARTICLE II. LICENSE AND OTHER GRANTS
A. SCOPE OF LICENSE TO LICENSEE
1. LICENSED NUTRITIONAL PLANT PRODUCTS. Subject to the terms and
conditions of this Addendum, Demegen grants to Licensee, and Licensee accepts
from Demegen, an exclusive world-wide license to Nutrition Patents and
Technology to make, have made, use, offer to sell, sell for use and sublicense
Licensed Nutritional Plant Products in the Nutritional Field of Use.
2. SUBLICENSING RIGHTS AND RESTRICTIONS. Licensee will have the right
to sublicense any of the rights granted to Licensee hereunder, except that
Licensee will not have the right to assign, transfer or sublicense any rights
under the LSU Licensed Patents or the Supplemental Patent Rights without the
express prior approval of LSU, such approval not to be unreasonably withheld.
Notwithstanding the foregoing, no prior approval from LSU will
be required: (i) to sell Licensed Nutritional Products to arms-length purchasers
(e.g. distributors or farmers), even where such a sale is accompanied by an
express or implied sublicense under one or more of the LSU Licensed Patents or
Supplemental Patent Rights regarding the commercial use of such Licensed
Nutritional Product for non-developmental purposes (ii) to sublicense an
Affiliate of Licensee in accordance with Paragraph 5 of this Article II; or
(iii) to license a third party under one or more LSU-approved standard-form
sublicenses (the "Standard-Form Sublicenses"). Attached as Schedule D is a
Standard-Form Sublicense which has been approved by LSU.
3. STANDARD-FORM SUBLICENSE. At any time during the term of this
Addendum, Licensee may request that LSU and Licensee negotiate in good faith to
develop one or more
2
3
additional Standard-Form Sublicenses. Licensee shall prepare the first draft of
each proposed Standard-Form Sublicense, and thereafter the parties shall discuss
and negotiate modifications to the initial draft in good faith. Each party's
obligation in this respect is limited to an obligation to negotiate in good
faith; neither party is obligated to approve a proposed Standard-Form Sublicense
if mutually agreeable terms cannot be found.
By way of illustration and not limitation, the factors that
LSU considers important in reviewing proposed sublicenses include the following:
adequate liability insurance; adequate indemnity in favor of LSU; prohibitions
against further assignment, sub-sublicensing, or transfer; prohibitions against
the use of LSU's name; prohibitions against patent misuse; the right to audit;
marking of Licensed Nutritional Products with appropriate patent numbers; and,
if a particular sublicense is intended to survive a possible termination of the
present Agreement before the expiration of all pertinent LSU patents, if any,
included within Nutrition Patents and Technology, a clear and acceptable
demarcation of the respective rights and obligations of LSU and the sublicensee
in those circumstances. Once LSU and Licensee have approved the form and
substance of a particular Standard-Form Sublicense, Licensee may thereafter
enter into one or more sublicenses with third parties using that approved
Standard-Form Sublicense, without further approval from LSU, provided that: (1)
no modifications are made to the approved Standard-Form Sublicense that would
diminish in any respect the protections afforded to LSU by the approved
Standard-Form Sublicense (other modifications being permissible if they do not
diminish the protections afforded to LSU in any manner); and (2) a complete copy
of the fully-executed Standard-Form Sublicense is delivered to LSU within thirty
days of execution. A proposed sublicense that does not satisfy these criteria
may be submitted for LSU's review and approval under Paragraph 2 above.
LSU may at any time, acting in good faith, withdraw its
approval of a particular Standard-Form Sublicense upon notice to Licensee. Such
a withdrawal of approval shall not affect the validity of any sublicense using
that Standard-Form Sublicense that was fully executed by all parties prior to
LSU's withdrawal of approval. Where reasonably feasible, LSU shall inform
Licensee of the reason for LSU's withdrawal of a previous approval, and shall
propose modifications to the Standard-Form Sublicense that would make it once
again acceptable to LSU.
4. U.S. GOVERNMENT RIGHTS. The licenses granted to Licensee under
Paragraphs 1 and 2 above are subject to any rights that the United States
Government may have in Nutritional Patents and Technology pursuant to 35 U.S.C.
Sections 200-212.
5. AFFILIATES. Licensee will have the right to extend the license
rights granted under this Addendum to Affiliates of Licensee, provided that such
Affiliates agree in writing to be bound by all of the provisions of this
Addendum.
B. TERM. The term of this Addendum will continue until the later of (i)
expiration of the last to expire of any patent within Nutritional Patents and
Technology; or (ii) the cessation of the sale or use of any Licensed Nutritional
Plant Products by Licensee or its Affiliates, or any of their sublicensee,
unless earlier terminated in accordance with applicable provisions of this
3
4
Addendum. Should the LSU License be terminated or converted into a non-exclusive
license by LSU, LSU has agreed that Licensee's rights under this Addendum
regarding the LSU Licensed Patents and Supplemental Patent Rights will not be
diminished for the term of the LSU License, provided that; (i) Licensee pays to
LSU, or to such other person or entity which holds the rights granted by LSU to
Demegen which are sublicensed to Licensee under this Addendum, the royalties
otherwise payable under this Addendum; (ii) Licensee is not in breach of any
other material term of the Agreement; and (iii) in connection with the
continuation of this License following the termination of the LSU License, LSU
will not incur any obligation which it did not already have to Demegen under the
LSU License, or to Licensee under the terms of this Addendum. The parties
acknowledge that the term of the LSU License only extends until the last to
expire of any patents included within the definition of "Licensed Patents" as
defined in said License Agreement.
C. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions of this Addendum,
Demegen also grants to Licensee rights of first refusal to obtain exclusive
licenses to: (i) Nutrition Patents and Technology for Supplemental Nutrition
Applications; and (ii) After Acquired Nutritional Technology; in accordance with
the provisions of Article VI.
D. LIMITED RESERVATION OF RIGHTS. Licensee agrees to a limited reservation of
rights by Demegen in Nutritional Patents and Technology to permit Demegen to
grant to the Foundation a non-exclusive, royalty-free license to Nutrition
Patents and Technology solely for humanitarian purposes, subject to Licensee's
consent, which consent will not be unreasonably withheld. Licensee further
agrees, as additional consideration for the grant of the license under this
Addendum, to amend the Agreement to permit Demegen to grant a license to the
Foundation to Licensed Patents and Licensed Technology solely for humanitarian
purposes, subject to Licensee's consent, which consent will not be unreasonably
withheld.
ARTICLE III. ROYALTIES AND FEES
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portion will be filed separately with the Commission.)
A. MINIMUM ANNUAL ROYALTIES. Licensee shall pay Demegen a minimum royalty of two
hundred thousand dollars ($200,000) per year for the licenses granted pursuant
to this Addendum (the "Minimum Annual Royalty"), such Minimum Annual Royalty
will be first payable upon the signing of this Addendum and on the anniversary
of said date in each subsequent year, which amount will be increased for each
year after the first year by $20,000 per year. The Minimum Annual Royalty
obligation will terminate upon: (i) the achievement of both "Technical
Feasibility Benchmarks" set forth in Section A of Article IV and any one of the
three "Animal Feeding Benchmarks" set forth in Section B of Article IV; and (ii)
the payment by Licensee of the amounts due to Demegen for the achievement of
said benchmarks.
B. EARNED ROYALTY ON SALES BY LICENSEE.
1. On a quarterly basis, Licensee shall pay to Demegen an earned
royalty for Licensed Nutritional Plant Products in an amount equal to the
greater of the following two amounts [(a) or (b)] for each Licensed Nutritional
Plant Product that is made, used, sold, or
4
5
imported by Licensee; (a) the sum of *** of Net Sales, if any, and *** of Trait
Marketing Revenue, if any; or (b) the sum of *** of Gross Value Added, if any,
and *** of Trait Marketing Revenue, if any.
2. Earned royalties on sales will be paid quarterly, by March 15, June
15, September 15 and December 15 based on Net Sales receipts received by
Licensee during the prior three-month calendar quarter. The royalty calculation
for each calendar quarter will be determined independently, without carrying
forward or carrying backward amounts attributable to any other calendar quarter.
Furthermore, the royalty for each Licensed Plant Product will be determined
separately - so that it is possible, for example, that the royalty for the first
such Licensed Plant Product could be *** of Net Sales, while the royalty for a
second Licensed Plant Product during the same calendar quarter could be *** of
Gross Value Added.
3. In the event that no plant product exists which is the suitable
standard of comparison for use in the determination of Gross Value Added for a
Licensed Plant Product, Licensee and Demegen will meet, discuss and attempt to
mutually agree upon an appropriate standard plant product to be used for the
purposes of calculating the Gross Value Added. In the event the parties are
unable to agree upon this standard, the matter will be referred to arbitration
in accordance with Paragraph J of Article XVIII.
4. No royalty will be due on the sale, use, importation or transfer of
any Licensed Nutritional Plant Product which is used for the production of
additional planting stock of such Licensed Nutritional Plant Product under a
contract for the repurchase of such production by Licensee or its Affiliates. No
royalty will be due on the resale of planting stock of Licensed Nutritional
Plant Products purchased from a sublicensee in the case of crop failure, or on
the use of a crop of Licensed Nutritional Plant Products purchased from a
customer of such planting stock (e.g., a grain crop used to produce oil), to the
extent that Demegen has already received royalties to which it was entitled with
respect to the planting stock of such Licensed Nutritional Plant Products under
the terms of this Addendum calculated on the basis of a bona-fide arms-length
transaction at royalty rates offered to purchasers not having the relationship
of seller to or producer for Licensee.
C. EARNED ROYALTIES FROM SUBLICENSEES. For payments received from sublicensees
for the use of the technology licensed to Licensee under this Addendum (other
than payments made for the purchase or use by a sublicensee of a Licensed
Nutritional Product manufactured by Licensee or its Affiliates, which payments
are subject to the provisions of Paragraph B above), Licensee shall pay to
Demegen earned royalties on a quarterly basis in accordance with the provisions
set forth below:
1. For payments from sublicensees which are license issue fees, license
maintenance fees, or technology milestone payments, an amount equal to *** of
such payments received by Licensee for all Crops. Specifically excluded from
such payments are payments to Licensee attributed for bona fide services
rendered by Licensee to sublicensees for regulatory support, product
registration, and research and development funding, and Trait Marketing Revenue.
5
6
2. For payments from sublicensees which are running royalties
calculated as a percentage of sublicensee's Net Sales, an amount equal to *** of
the *** of such payments received by Licensee on a Licensed Nutritional
Product-by-Licensed Nutritional Product basis and *** of the amount *** for each
such Licensed Nutritional Product; except that, for Licensed Nutritional
Products for fruit and vegetable crops (other than Solanum tuberosum (potato),
the amount to be paid to Demegen for said payments from sublicenses in *** for
each such Licensed Nutritional Product will be *** of such excess.
3. For payments from sublicensees of Trait Marketing Revenue which are
not covered by the provisions of Paragraph B, an amount equal to *** of such
payments received by Licensee. (That is, for Trait Licensing Revenue received in
connection with applicable sales by sublicensees under the Agreement, the earned
royalty due will be *** of the net amount of said revenue actually received by
Licensee and its Affiliates after all discounts, rebates, collection fees,
refunds and returns.)
4. Earned royalties on payments received from sublicensees which are
covered by this Paragraph C will be paid quarterly, by March 15, July 15,
September 15 and December 15 based on all such payments received by Licensee
during the prior calendar quarter.
D. QUARTERLY REPORTS. Licensee shall forward to Demegen quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demegen under this
Addendum. The quarterly reports will also provide information on the status of
Licensee's marketing and/or sublicensing of Licensed Nutritional Plant Products.
Such a report shall be made for each quarter beginning after commercialization
of the first Licensed Product, whether or not any payment is due for that
quarter.
E. PATENT COSTS. Without affecting Demegen's obligation to LSU for patent
prosecution under the License Agreement, Licensee will pay all reasonable
out-of-pocket costs, fees and attorneys' fees and expenses of maintenance and/or
further prosecution of all patents included within the Nutritional Patent Rights
and Technology listed in section A3 of the Agreement on the same basis as set
forth in Section F of Article III of the Agreement.
ARTICLE IV. BENCHMARK PAYMENTS
A. TECHNICAL FEASIBILITY BENCHMARKS IN MONOCOTS AND DICOTS. A payment of ***
shall be made by Licensee to Demegen upon the achievement of the technical
feasibility benchmarks set forth on Addendum Schedule A in each of a monocot and
a dicot (other than sweet potato), up to a total of *** for the achievement of
said benchmarks in both a monocot and a dicot (other than sweet potato).
6
7
B. ANIMAL FEEDING BENCHMARKS. A payment of *** shall be made by Licensee to
Demegen upon the achievement of the animal feeding benchmarks set forth in
Addendum Schedule B in each of swine, poultry and rat feeding studies with plant
material, up to a total of *** for the achievement of the animal feeding
benchmarks for all three animals.
C. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF CERTAIN CROP(S). In addition
to the payment provided under subparagraph C hereof, payments of *** each shall
be made by Licensee to Demegen on the First Commercial Sale of Licensed Plant
Products within a Crop of ***, ***, ***, *** or ***, up to a total of *** if
there is a First Commercial Sale in each of four of said *** crops.
D. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF ANY OTHER CROP WITHIN THE
FIELD OF ACTIVITY. Licensee shall make a payment to Demegen upon the First
Commercial Sale of any Licensed Plant Products for any Crop, other than a Crop
for which a *** payment was made to Demegen under Section C of this Article IV,
of an amount equal to *** for each Crop up to a maximum total of *** (that is,
*** for each of the first *** such Crops.
E. ADDITIONAL PAYMENTS FOR ACHIEVEMENT OF CUMULATIVE GROSS MARGIN BENCHMARK FOR
SALE OF CERTAIN CROP(S). In addition to the payment set forth above, payments of
*** each shall be made by Licensee upon the achievement of Cumulative Gross
Margin Benchmark in each of a ***, ***, ***, ***, and ***, up to a total of ***
if a Cumulative Gross Margin Benchmark is achieved in each of ***.
F. PAYMENT. Each Benchmark payment will be due and payable in full on or before
the thirtieth (30th) day following the satisfaction of all conditions which give
rise to the payment obligation for such benchmark.
G. INFLATION ADJUSTMENT. To the extent that any of the specific dollar amounts
set forth in Paragraph A, B and C of this Article have not been paid by January
1, 2006 such remaining amounts will be adjusted upward annually by any increases
in the United States Consumer Price Index For All Urban Consumers, All Items
U.S. City Average (the "Index") from its value in January, 1999, less one
percent (1%) per year. No downward adjustments will be made. The dollar figures
shall first be adjusted beginning in January 2006.
ARTICLE V. AUDITING AND PAYMENT PROCEDURES
The Auditing and Payment Provisions of Article V of the Agreement will
apply to Licensees payments and recordkeeping under this Addendum.
7
8
ARTICLE VI. AGREEMENT NOT TO LICENSE CONCERNING
SUPPLEMENTAL NUTRITION APPLICATIONS
In order to provide Licensee with the opportunity to negotiate an
exclusive license for said applications, Demegen will not license rights under
the Nutrition Patents and Technology to any third party for Supplemental
Nutritional Applications or to After-Acquired Nutritional Technology for use in
the Nutritional Field of Use or in the field of Supplemental Nutritional
Applications without first offering Licensee an opportunity to negotiate for
said license. In the event Demegen and Licensee are unable to reach agreement on
the terms of any such license, and obtain LSU's consent thereto to the extent
that LSU Licensed Patents or Supplemental Patent Rights are involved, within 120
days after the commencement of said negotiations Demegen will thereafter be free
to license said applications to others. However, should Demegen offer a license
to said rights to a third party on terms more favorable than those offered to
Licensee within one year from said date, Licensee will have a right of first
refusal to obtain such license on the terms so offered. During the term of the
option, and prior to Licensee's exercise of the option, Licensee will have the
right, but not the obligation to designate and pay for patent prosecution and
maintenance of patents for Supplemental Nutritional Applications or
After-Acquired Nutritional Technology.
ARTICLE VII. JOINT DEVELOPMENT PROGRAM
REGARDING PEPTIDES FOR NUTRITIONAL
IMPROVEMENT OF PLANTS
A. JOINT DEVELOPMENT PROGRAM. Licensee and Demegen, without restricting any
activities they may desire to participate in with third parties, will engage in
a joint development program commencing on the effective date of this Addendum to
screen and produce peptides for use in nutritional improvements in plants.
B. RESEARCH COMMITTEE. The joint development program will be conducted under the
direction of a research committee composed of two members appointed by Demegen
and two members appointed by Licensee. The research committee will establish the
specific objectives of the program, determine the activities to be performed by
the parties, and measure progress against goals. All decisions of the research
committee will be made by unanimous consent. The research committee will meet
four (4) times per year. In the event the committee is unable to agree on any
issue, the matter will be decided by the Presidents of both Demegen and
Licensee.
C. SERVICES OF ▇▇. ▇▇▇▇▇▇. Demegen will provide the services of ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, on a part-time basis, to design, plan the synthesis of and interpret
testing results regarding such peptides.
D. FUNDING BY LICENSEE. Licensee will fund Demegen's activities under the joint
development program in accordance with the following schedule for a total of Two
Million Dollars ($2,000,000) over 5 years, subject to Demegen's commitment of
providing personnel for such activities at or in excess of the minimum indicated
full-time equivalent (FTE) level indicated for said years. Payment by Licensee
to Demegen under this provision will be made in
8
9
equal semi-annually installments in advance for the duration of the joint
research program. Accordingly, for the first year of the joint research program,
$150,000 will be due promptly after the Addendum Effective Date, and $150,000
will be due on the date which is six months after the Addendum Effective Date.
Thereafter, one-half of the annual funding will be payable on the annual
anniversaries of said dates.
RESEARCH FUNDING SCHEDULE
Program Year Licensee Funding of Demegen Min. FTE
Demegen Level
1998 - 1999 $300,000.00 2.0
1999 - 2000 $350,000.00 2.3
2000 - 2001 $400,000.00 2.6
2001 - 2002 $450,000.00 3.0
2002 - 2003 $500,000.00 3.0
ARTICLE VIII. OWNERSHIP OF INTELLECTUAL PROPERTY
A. DEMEGEN INVENTIONS. Nutritional peptides or other technology for use within
the Nutritional Field of Use, invented solely by Demegen employees, consultants
or other agents shall be owned by Demegen and not jointly owned ("Demegen
Inventions").
B. LICENSEE INVENTIONS. Nutritional peptides or other technology for use within
the Nutritional Field of Use, invented solely by Licensee's employees,
consultants or other agents shall be owned by Licensee and not jointly owned but
in the event such Nutritional peptides or other technology are subject to, or
were developed from or by use of, Demegen Nutritional Patents and Technology,
then they will be subject to the terms of this Addendum, including but not
limited to the royalty provisions set forth in Article III and applicable
payments in Article IV.
C. JOINT INVENTIONS. Joint Inventions will be jointly owned by Licensee and
Demegen ("Joint Inventions").
D. LICENSE OF INVENTIONS.
1. Subject to the terms of this Addendum, including but not limited to
the royalty provisions set forth in Article III and applicable
payments in Article IV; Licensee will be granted a world-wide,
perpetual, exclusive license with a right to sublicense said
license, to use Demegen Inventions and Joint Inventions in the
Nutritional Field of Use. Licensee hereby grants to Demegen a
world-wide, royalty free, perpetual, exclusive license, in Joint
Inventions, with a right to sublicense, for all applications other
than to the extent that such applications have been exclusively
licensed to Licensee by Demegen; and
2. With respect to Licensee Inventions or Joint Inventions outside
both the Nutritional Field of Use and other uses authorized by this
Addendum and the Agreement which either (i) were developed using
non-public technology licensed or sublicensed by Demegen under this
Addendum and the Agreement or (ii) the development of which
9
10
was subject to one or more claims included within said technology,
then neither Licensee nor Demegen will have the right to
commercially exploit said Inventions until a mutually acceptable
written agreement is reached covering such commercialization.
However, nothing in this paragraph will restrict Licensee from
using any invention on a royalty-free basis to the extent that any
third party would be free to develop such and do so using publicly
available information without violating patents or trade secrets
owned by or licensed to Demegen.
10
11
ARTICLE IX. RETURN OF RIGHTS
If Licensee fails to begin to develop specific plans for applications
for particular Crops, uses or territories subject to this Addendum within three
years of the Addendum Effective Date, Demegen may propose a specific plan for
such and bring to Licensee a suitable party ready, willing and able to implement
such plan. If Licensee does not reach an agreement with such party for the
particular Crop(s) involved, or develop and initiate a suitable alternative plan
for development internally or with another party, then Demegen may request that
Licensee's rights to Licensed Patents and Demegen Technology in said area(s) be
returned to Demegen so as to permit Demegen to pursue said plan. Licensee shall
not unreasonably refuse to return said rights to Demegen, provided, however,
that Licensee will retain a non exclusive license to Licensed Patents and
Licensed Technology in said area(s) unless the parties negotiate otherwise. As
long as Licensee is not in breach of any material term of this agreement, it
will not be compelled under this Article IX to turn over to Demegen any of
Licensee's rights in Joint Inventions without compensation. If the parties are
unable to agree on the application of this provision with respect to a
particular Crop application, or the terms of a license for such application,
then the matter will be submitted to arbitration in accordance with the
provisions of Paragraph J of Article XVIII of the Agreement.
ARTICLE X. COMMERCIALIZATION
A. MARKETING OBLIGATIONS. Licensee, at Licensee's sole expense, shall: (1) act
with commercially reasonable judgment and diligence to develop commercially
marketable Licensed Nutritional Plant Products, and to develop competitive
markets for those Licensed Nutritional Products; (2) actively seek sublicensees
or partners for Licensed Nutritional Products, uses of Licensed Nutritional
Plant Products or in geographic areas Licensee is not actively pursuing on its
own; and (3) from time to time, at the request of a party, but no less than
semi-annually, Licensee and Demegen will meet to discuss Licensee's marketing
activities as set forth above.
B. REGULATORY APPROVAL. Licensee, at Licensee's expense, will undertake all
reasonable efforts required to file and subsequently to obtain any state,
federal, or other governmental license or regulatory clearance necessary for the
use of Licensed Nutritional Plant Products. Any research necessary or desirable
for the commercialization or marketing of Licensed Nutritional Plant Products by
Licensee shall be the sole responsibility of Licensee. Licensee, at Licensee's
sole expense, will prepare and deliver all necessary and appropriate documents,
and take all reasonably necessary and appropriate actions, to seek to obtain any
such license or regulatory clearance. All such registrations or clearances will
be held in Licensee's name and will be owned exclusively by Licensee.
11
12
ARTICLE XI. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Addendum and to perform its
obligations hereunder.
B. DEMEGEN WARRANTIES. Demegen further warrants that LSU has consented to this
Addendum under Paragraph 2.2 of the Supplemental Licensing Terms and Conditions
of the LSU License, and that as of the date of execution of this Agreement
Demegen has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Addendum, to which the use of the technology
as licensed to Licensee under this Addendum would be subject.
C. EXCLUSIONS. Demegen and LSU make no warranty or representation whatsoever as
to the usefulness of Demegen Nutritional Patents and Technology or Licensed
Nutritional Products, or their fitness for the purpose for which they are
intended or for any other purpose. Demegen and LSU make no representations, and
extend no warranties of any kind, either express or implied, except as expressly
provided in this Agreement.
D. ADDITIONAL DISCLAIMERS. Nothing in this Addendum shall be construed as:
1. A warranty or representation by Demegen or LSU as to the validity,
enforceability, scope, or inventorship of any patent; or
2. A warranty or representation by Demegen or LSU that anything
licensed, sublicensed, made, used, sold, imported, or otherwise disposed of
under any license granted in or sublicense permitted by this Addendum is or will
be free from infringement of patents of third parties or other rights of third
parties; or
3. An obligation that Demegen or LSU bring or litigate actions against
third parties for infringement, except to the extent and in the circumstances
stated in Article XIV of this Addendum; or
4. A requirement that Demegen or LSU file or prosecute any patent
application, secure the issuance of any patent, or maintain any patent; or
5. An establishment of a partnership, joint venture, agency, or
employer-employee relationship between the parties; and neither party shall
represent the contrary to anyone else.
12
13
E. DISCLAIMER OF RESPONSIBILITY. Neither Demegen nor LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, other transferees, or sublicensees of Licensee or its Affiliates, or by
any product or process incorporating or made by the Nutrition Patents and
Technology, or incorporating or made by the use of any information furnished
under this Addendum.
ARTICLE XII. EFFECTIVE DATE
The provisions of this Addendum will become effective only upon the
separate approval of the terms and conditions set forth herein by the Board of
Directors of both Demegen and Licensee.
ARTICLE XIII. TERMINATION
A. This Addendum will terminate if the conditions set forth in Article XII are
not satisfied by November 15, 1998, or such later date as may be mutually agreed
upon by Demegen and Licensee.
B. Demegen may terminate this Addendum and the license granted hereunder upon
written notice to Licensee in the event that Licensee shall materially breach
its obligations under this Addendum and such default is not cured within thirty
(30) days of receipt of a written demand from Demegen to cure said default.
Termination of the Addendum under this provision will not operate to terminate
Licensee's other rights and obligations under the Agreement, provided that
Licensee is not also in material breach of its other obligations under the
Agreement.
C. Licensee shall have the right to terminate this Addendum on the first
anniversary of the Addendum Effective Date or anytime thereafter upon one
hundred thirty-five (135) days advance written notice to Demegen. Any such
termination of this Addendum will not affect any other rights or obligations of
Licensee under the Agreement not set forth in this Addendum.
D. Upon termination of this Addendum, Licensee's license and other rights under
the Addendum will terminate. However, the rights of sublicensees of Licensee
will continue following such termination provided that the sublicensees agree to
make all future royalty payments and license fees under their sublicense
agreements directly to Demegen. In addition, (i) Licensee shall have the right
to sell its existing inventory of Licensed Nutritional Plant Products until such
inventory is exhausted, provided that Licensee pays any earned royalties or
other amounts which may be due under this Addendum with respect to such sales;
and (ii) Licensee shall remain obligated to pay to Demegen any unpaid license
fees, minimum royalties, earned royalties and benchmark payments which had
accrued prior to termination; except that, if Licensee terminates this Agreement
under Paragraph C above, Licensee will not be required to make any minimum
royalty payment or benchmark payment which had accrued after the date of the
advance written notice of said termination to Demegen, or within thirty (30)
days prior to such notice.
13
14
ARTICLE XIV. OTHER PROVISIONS
A. To the extent applicable, the provisions of Article XII through XIX of the
Agreement will apply to the activities of the parties under this Addendum. In
this connection, for purposes of the Agreement, references to Licensed Products
in Articles XII through XIX shall also be deemed to include Licensed Nutritional
Products, and references to Licensed Patents will also be deemed to include the
patents included within Demegen Nutritional Patents and Technology.
B. In view of the change of the corporate name of Demegen, all references to
Demeter in the Agreement will now refer to Demegen, Inc. This Paragraph B will
survive any termination of this Addendum.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: MYCOGEN CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------- -------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Date: 10/13/98
DEMEGEN, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
Date: 10/13/98
14
15
ACKNOWLEDGEMENT OF ADDENDUM
TO LICENSE AND ROYALTY AGREEMENT BY LSU
Approved and accepted by the Board of Supervisors of Louisiana State
University and Agricultural and Mechanical College pursuant to Paragraph 2.2 of
the Supplemental Terms of May 1, 1997 License and Royalty Agreement between the
Board of Supervisors of Louisiana State University and Agricultural and
Mechanical College and Demegen, Inc.
WITNESS: THE BOARD OF SUPERVISORS OF
LOUISIANA STATE UNIVERSITY
__________________________________ AND AGRICULTURAL AND
MECHANICAL COLLEGE
__________________________________
By: __________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
15
16
ADDENDUM SCHEDULE "A"
Technical Feasibility Benchmarks
The "Technical Benchmarks" for genetic expression of Demegen nutritional
proteins in recombinant monocot and dicot plants are as follows:
1. Genetically stable expression of a Demegen nutritional protein in a
recombinant monocot or dicot plant (with the exception of sweet potato) at
two percent (2%) or better of the total protein in that plant tissue that
serves as that portion fed to an animal, e.g., alfalfa foliage (leaves) or
rice grain (seeds).
2. Proof of genetic expression will be determined through the use of one or
several standard "Northern", "Western" and immunological plant tissue test
methods.
The specific design of experiments to determine the achievement of these
benchmarks must be agreed to beforehand by both Mycogen and Demegen.
17
ADDENDUM SCHEDULE "B"
Animal Feeding Benchmarks
The animal feeding benchmark goals that must be met to prove the safety and
nutritional feeding benefits of Demegen nutritional proteins are as follows:
1. No adverse health effects to the animal such as toxicity or allergic
reactions that are directly attributable to the Demeter nutritional
protein(s).
2. Statistically significant (P(is less than)0.5) evidence that the Demegen
nutritional protein(s) is a more efficient protein source than the protein
normally found in a standard animal feed ration where efficient is defined
as achieving one or more of the following during the first quarter of the
animal's feeding cycle:
a) Improved animal gain per pound of ration fed
b) Lower ration cost for an equivalent pound of animal gain
c) Faster growth rate per dollar cost of ration
d) Acceptable substitute (in terms of comparable costs and
nutrition benefit) for a current feed ingredient that is
considered less desirable
The specific design of experiments to determine the achievement of these
benchmarks must be agreed to beforehand by both Mycogen and Demegen.